The United Arab Emirates (UAE) has been in talks with the U.S. about the possibility of establishing a currency swap line, as revealed by the Middle East nation’s trade minister.
On Monday, Thani Al Zeyoudi, the UAE’s Trade Minister, unveiled the ongoing discussions during a conference in Abu Dhabi on Monday. Al Zeyoudi said, as per Reuters, that the U.S. “swap policy” is currently limited to a small group of only five countries, and is part of ongoing discussions with an elite set of partners.
The minister highlighted that the currency swap line is a reflection of the significant level of trade and investment between the two countries, making such an arrangement necessary.
However, he gave no further details on the discussions or any timeline for a possible currency swap agreement with the U.S.
The UAE has exited OPEC and OPEC+ effective May 1.
US Swap Arrangement With Countries
Central bank currency swap lines let institutions exchange currencies directly, reducing FX costs and risk, with the Fed maintaining permanent lines with five major central banks, which are the Bank of Canada, the European Central Bank, the Swiss National Bank, the Bank of England and the Bank of Japan.
Last month, Treasury Secretary Scott Bessent told the U.S. Senate Appropriations subcommittee that several U.S. allies in the Gulf and Asia have requested currency swap lines to manage economic stress from the Middle East conflict. He told senators that such arrangements, potentially including the UAE, would help stabilize dollar funding markets, reduce financial turmoil, and prevent disorderly selling of U.S. assets.
In October, the U.S. provided Argentina with a $20 billion currency swap to stabilize the peso during a volatile election period, which helped strengthen President Javier Milei‘s party. Bessent defended the arrangement, saying it is a “profitable swap line” aimed at “pursuing peace through economic strength,” rather than a bailout.
Experts Warn US On UAE Swap Lines
Meanwhile, in a piece in the Financial Times, on Friday, Brad Setser, senior fellow at the Council on Foreign Relations, and Stephen Paduano of the University of Oxford Blavatnik School of Government, argued that the U.S. should reject the UAE’s request for financial support.
They said that “UAE is not Argentina” and there is no real financial stress on the UAE dirham peg or reserves, noting the country can still raise funds easily in global markets. They also warned that the U.S. Treasury’s Exchange Stabilization Fund should not be used as a geopolitical bailout tool for countries that are not in genuine financial distress.
However, the UAE trade minister clarified that the swap is not about bailing out, but rather about facilitating transactions and investments between the two nations.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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