Treasury Secretary Scott Bessent confirmed on Friday that the United States is discussing currency swap lines with a number of other countries, specifically citing potential partners in the Gulf and in Asia. He said several allied governments have sought access to these arrangements as they cope with energy disruptions and related consequences stemming from the Iran war.
Bessent did not name the specific countries that have made requests. He described the proposed swap lines as mutually beneficial, saying they would bolster international dollar usage and liquidity while helping to keep dollar funding markets functioning smoothly.
In a message posted on X, Bessent wrote: "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." He added: "Extending permanent swap lines can be a major first step in creating new U.S. dollar funding centers in the Gulf and Asia."
According to testimony Bessent delivered to U.S. lawmakers on Wednesday, a number of allies in the Gulf and in Asia have formally requested currency swap lines from the United States to help manage energy shocks and other fallout tied to the Iran war. He also said that both the United States and the United Arab Emirates would stand to gain from a proposed swap line that President Donald Trump said he was considering on Tuesday.
Bessent highlighted the financial strength of the requesting governments, noting many maintain "pristine sovereign balance sheets and large dollar holdings - larger than many major economies with whom we maintain permanent swap facilities." He commended these authorities for exploring additional financial buffers.
Currently, the Federal Reserve maintains standing central bank currency swap lines with five major central banks: the Bank of Canada, the Bank of Japan, the European Central Bank, the Bank of England and the Swiss National Bank. Those institutions are permitted to borrow dollars from the Fed collateralized by their own currencies.
By contrast, smaller central banks generally borrow dollars through their accounts at the New York Fed by pledging the dollar-denominated U.S. Treasury securities they hold on deposit there as collateral. During the COVID-19 pandemic the Fed temporarily extended the same borrowing advantage to nine additional countries: Mexico, Brazil, Australia, Denmark, Norway, Sweden, South Korea, New Zealand and Singapore.
Expanding permanent swap facilities beyond the current five central banks would constitute a significant policy shift. Bessent noted it is unclear whether such a change could proceed before confirmation and swearing-in of the Federal Reserve chair nominee put forward by President Trump, Kevin Warsh.
Warsh, speaking during his confirmation hearing this week, referenced deeper cooperation with the Treasury Department on issues outside traditional monetary policy, including international finance.
As discussions continue, the prospect of permanent swap lines and the creation of new dollar funding centers in the Gulf and Asia remain policy options under active consideration by U.S. authorities and potential partner governments.