US Treasury weighs permanent dollar swap lines for Gulf, Asian allies

Bessent stated that several allied nations requested the swap lines to help manage the economic fallout and energy shocks stemming from the Iran conflict.
 

"Additional swap lines can benefit our nation by reinforcing dollar usage and liquidity internationally, maintaining smooth functioning in dollar funding markets, promoting trade and investment with the United States," Bessent said in a post on X on Friday.
 

He further emphasized the long-term strategic goal, adding, "Extending permanent swap lines can be a major first step in creating new U.S. dollar funding centers in the Gulf and Asia."
 

While traditional swap lines are typically handled by the Federal Reserve, analysts note that these new agreements would likely be drawn from the Treasury's limited Exchange Stabilization Fund. Experts view the potential facilities not as emergency bailouts for cash-strapped nations, but rather as confidence-building measures to prevent market disruptions and reduce the need for these nations to sell off U.S. Treasury assets.
 

Bessent noted the strong financial positions of the requesting nations, stating, "Many of these countries have pristine sovereign balance sheets and large dollar holdings – larger than many major economies with whom we maintain permanent swap facilities."
 

The United Arab Emirates, which was named as one of the countries in discussions, strongly pushed back against any market speculation that it was facing a liquidity squeeze.
 

Yousef al-Otaiba, the UAE’s ambassador to Washington, stated on X that "any suggestion that the UAE requires external financial backing misreads the facts."
 

"The UAE is one of the world’s most financially resilient economies, underpinned by more than $2tn in sovereign investment assets," he added.

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