- The UAE has begun talks with the US on a potential currency swap arrangement.
- Discussions were led by UAE Central Bank Governor Khaled Balama in Washington.
- The swap aims to ensure dollar liquidity amid heightened economic risks from conflict.
The UAE has began discussions with the US to secure a potential deal, which may include currency swap arrangement, as the Middle East conflict has heightened the risks to its economy, according to a Wall Street Journal report citing US officials.
The proposal was raised by UAE Central Bank Governor Khaled Mohamed Balama in the meetings conducted in Washington last week with US Treasury Secretary Scott Bessent and officials from the Treasury and Federal Reserve.
The UAE representatives noted that the country has avoided the worst economic fallout so far, however it may need a financial help if conditions worsen further, the officials told the publication.
Notably, no formal request has been made and the proposal remains at the preliminary stage, as per people familiar with the matter. The idea seeks to ensure access to dollar liquidity in case of market stress or pressure on foreign reserves.
The Emirati officials also flagged the US President Donald Trump's decision to attack Iran, which has put the UAE in a conflict with potentially prolonged economic consequences, US officials said, according to the report.
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According to them, if the dollar liquidity tightens, the UAE may be forced to use alternative currencies such as the Chinese yuan for oil sales and other transactions.
These talks come as the conflict has disrupted key pillars of the UAE economy. There has been an significant impact on the major source of dollar revenues which includes damage to oil and gas Infrastructure and restrictions on tanker movement through the Strait of Hormuz. Addtionally, it has raised risks of capital flight and market volatility, likely impacting the UAE's place as regional financial hub.
Currency swaps are administered by the Federal Reserve and extended to certain central banks during periods of severe financial stress. The Fed keeps arrangements with major economies such as the UK, Japan, Canada, Switzerland and the euro area.
Federal Open Market Committee is not likely give nod for a swap line for the UAE, due to its relatively limited financial links with US markets, US officials told the news portal.
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