The Federal Reserve cut the cost of emergency dollar funding for European banks as part of a globally coordinated central bank response to the continent’s sovereign debt crisis.

The interest rate has been reduced to the dollar overnight index swap rate plus 50 basis points, or half a percentage point, from 100 basis points, and the program was extended to Feb. 1, 2013, the Fed said in a statement. The Fed will coordinate with the European Central Bank in the program, which was also joined by the Bank of Canada, Bank of England, Bank of Japan and Swiss National Bank.

The move is aimed at easing strains in markets and boosting the central banks’ capacity to support the global financial system, the statement said. The cost for European banks to fund in dollars rose to the highest levels in three years today as concerns about a possible breakup of the euro area increased after leaders said they’d failed to boost the region’s bailout fund as much as planned.

The dollar swap lines were previously set to expire Aug. 1, 2012. The new pricing will be applied to operations starting on Dec. 5.