European central banks have opened the floodgates with promises of unlimited dollar funding in a coordinated action with the US Federal Reserve.

The European Central Bank, Bank of England and Swiss National Bank said they were ready to inject as much as needed into the markets for dollars funding covering periods of seven days, a month and 84 days.

Banks would "be able to borrow any amount they wish against the appropriate collateral in each jurisdiction," the central banks said in a statement. In Tokyo, the Bank of Japan said it was considering a similar step.

The joint move marks a further dramatic escalation of the weaponry being used by the world's monetary authorities to unblock paralysed financial markets, and follows the ECB decision last week to offer unlimited euro liquidity in its regular weekly actions.

As in that move, the unlimited dollar funding announced on Monday will be made available at a fixed interest rate - rather than banks bidding according to how desperate their need is for cash.

Swap lines agreed with the US Fed would be expanded to whatever size deemed necessary by demand, the central banks said.

After attending weekend meetings of global policy makers in Washington and eurozone leaders in Paris, Jean-Claude Trichet, ECB president had signalled late on Sunday that the ECB was urgently considering further steps it could take to avert a financial markets catastrophe. "We can imagine new measures to enlarge access to our system of guarantees," he said.

The Frankfurt-based institution could broaden the range of assets it accepts as collateral in money market operations, Mr Trichet hinted. But he argued that the ECB did not have the legal power to follow the example set by the US Fed and buy commercial paper.

Highlighting the role the world's central banks are playing in the absence of functioning markets, the ECB said a record €154.6bn had been parked with at the weekend at a penalty low interest rate - a measure of the mutual distrust between private-sector banks.

The European central banks said the first seven-day auctions of unlimited dollar liquidity would be held on Wednesday. The interest rate will be announced in advance by the ECB, the Bank of England and the Swiss central bank. The ECB said that from Thursday, the emergency injections of overnight dollar liquidity would be conducted "only if necessary".

In their statement, the central banks said they would "continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets."