ع
UAE officials described talks with the United States over a possible currency swap line as an elite matter rather than an indication of any need for financial support, The National reported on May 10. Foreign Trade Minister Dr Thani Al Zeyoudi told a panel in Abu Dhabi that the arrangement was not about a bailout, while Ambassador Yousef Al Otaiba pushed back against suggestions that the UAE required external backing despite its substantial sovereign assets and reserves. The National noted that the UAE maintains more than two trillion dollars in sovereign investment assets and that its central bank holds over 300 billion dollars in foreign currency reserves. Such a swap line would reinforce confidence in the dirham’s peg to the dollar and strengthen the positions of Abu Dhabi and Dubai as regional financial centres, according to economists cited in the report.
Currency swap lines allow central banks to exchange currencies on a temporary basis so that one can provide liquidity in the other’s currency, with the borrowing central bank assuming the associated credit risk. In a potential arrangement with the UAE, the Federal Reserve would lend dollars to the Central Bank of the UAE in return for dirhams, with the transaction reversing at a predetermined date and exchange rate, The National explained. Brookings Institution analysis from 2025 shows that the foreign central bank then on-lends those dollars to commercial banks in its jurisdiction while bearing any credit exposure. The mechanism dates to the Bretton Woods era and serves as an indirect way for the Federal Reserve to act as lender of last resort to overseas markets in a dollar-dominated system.
The Federal Reserve established its first reciprocal currency arrangements in the early 1960s to help manage pressures on the dollar’s gold convertibility under Bretton Woods, according to a National Bureau of Economic Research paper. Those early lines expanded over time, and the arrangements gained renewed prominence after the 2007 global financial crisis when the Federal Open Market Committee authorised dollar liquidity swaps with multiple central banks. Federal Reserve records indicate the standing swap lines now include the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank. A Yale School of Management primer from 2023 notes that the network allows participating central banks to obtain needed foreign currency liquidity without abrupt asset sales that could destabilise markets.
Usage of the Federal Reserve’s swap lines peaked above 580 billion dollars in December 2008 during the height of the global financial crisis, Federal Reserve Bank of Dallas figures show. A similar surge occurred at the onset of the Covid-19 pandemic, when outstanding drawings reached roughly 450 billion dollars in 2020 according to the same data. Current levels remain far lower, with Federal Reserve Board statistics placing weekly swap balances at just 250 million dollars as of early July 2026. These facilities have helped ease strains in short-term dollar funding markets by supplementing foreign banks’ access to the currency without forcing fire sales of dollar assets.
Economist Derek Tang at MPA Macro told The National that a US-UAE swap line would represent a missing piece for Abu Dhabi and Dubai as they compete with other regional hubs such as Riyadh to attract corporate business. Tang noted that inclusion in the arrangement would signal to investors that their assets placed in the UAE and in local currency carry added assurance, particularly given the dirham’s long-standing dollar peg. The National reported that only a handful of central banks hold standing swap lines with the United States, positioning such an agreement as a marker of closer financial integration. Treasury Secretary Scott Bessent has stated that a US-UAE swap would benefit both countries and that similar requests have come from other Gulf and Asian allies.
The discussions coincide with a transition at the Federal Reserve, where Kevin Warsh is expected to succeed Jerome Powell as chair this month, The National reported. In written testimony to a Senate committee, Warsh suggested that the central bank’s independence should be viewed primarily through the lens of monetary policy rather than international finance, indicating potential closer coordination with the Treasury on such matters. The Treasury can establish swaps through its Exchange Stabilisation Fund without congressional approval, though that fund carries a roughly 43 billion dollar cap while Federal Reserve lines are effectively unlimited. The National added that any US-UAE line would likely route through the Treasury given the procedural requirements at the Fed.
