Treasury Secretary Scott Bessent testifies during the Senate Financial Services and General Government Appropriations Subcommittee hearing on the Treasury Department’s fiscal year 2027 budget request on April 22, 2026 in Washington, DC.
Nathan Posner | Anadolu | Getty Images
Treasury Secretary Scott Bessent on Friday defended the possibility of the United States participating in currency swaps with allies in the Persian Gulf and Asia that are seeking financial support because of the Iran war.
Discussions with these countries regarding USD swap lines “are part of the ongoing daily conversations @USTreasury has had with our partners over the years,” Bessent said in the X post.
“This is a testament to the dominance of the U.S. dollar and the strength of the U.S. economic shield,” he said of the potential swap.
The claims about the benefits and commonality of swap lines come as the Trump administration considers providing a financial lifeline to the United Arab Emirates, CNBC reported on Tuesday.
It also comes two days after Bessent said “many” allies in the Persian Gulf were seeking similar safeguards as the ongoing war has devastated oil-producing economies.
A swap line involves the central banks of two countries agreeing to exchange equivalent amounts of each other’s currencies, and at the same time agreeing to exchange those amounts at a specified date in the future. According to the Fed, the U.S. maintains “continuing U.S. dollar liquidity swap line agreements” with the central banks of Canada, the United Kingdom, Japan, Switzerland, and the European Central Bank to “strengthen the provision of U.S. dollar liquidity.”
The tool dates back to the 1960s and has been used to stabilize Mexico’s economy in the 1980s after the Sept. 11 terrorist attacks, during the 2008 financial crisis and early in the COVID-19 pandemic, according to a report from the Yale School of Management.
The operation aims to ease tensions in global financing markets and give households and businesses in both countries some breathing room.
Traditional swaps are most often offered by the Federal Reserve, but the Treasury Department can use the Exchange Stability Fund to offer its own version of swaps.
The deal could pose political risks for President Donald Trump, whose approval ratings for the economy have declined as supply shocks from the war have sharply increased the prices of gasoline and other products, exacerbating Americans’ inflation problems. A CNBC national poll released Thursday found that 60% of respondents disapprove of President Trump’s economic response.
A potential swap line risks being seen as an unnecessary foreign bailout, especially in the case of a wealthy country like the UAE, which has one of the highest per capita national incomes in the world.
President Trump was asked about the possibility of a swap line with the UAE on CNBC’s “Squawk Box” on Tuesday, and appeared to say he was in favor of it.
“If they have a problem, I’ll be there for them,” Trump said.
In Friday’s X-Post, Bessent vigorously defended the additional swap line.
He argued that these “could benefit our nation by enhancing international dollar access and liquidity, maintaining the smooth functioning of dollar funding markets, facilitating trade and investment with the United States, and, in a hypothetical stress scenario, preventing disorderly sales of U.S. assets and disruption to U.S. markets, businesses, and households.”
“Many of these countries have strong sovereign balance sheets and large dollar holdings, larger than many major economies that maintain permanent swap systems,” he said. Bessent did not name any countries in his post, and he and Trump specified only the UAE earlier this week.
“We commend our allies for their foresight and prudent risk management in seeking additional financial buffers during periods of market quiescence. Extending the perpetual swap line could be an important first step in creating new US dollar funding centers in the Gulf and Asia.”
He added: “The dollar’s dominance and reserve currency status will be strengthened by continued long-term efforts, including countering the growth of problematic alternative payment systems. Under the President, this will serve as economic leadership for the United States.”
—CNBC’s Eamon Javers contributed to this report.
