A coordinated effort by the United States and Japan to support the yen has opened a wider debate over the dollar reserve status and the ability of foreign central banks to freely use their Treasury holdings during periods of market stress.
University of California, Berkeley economist Barry Eichengreen argues that the mechanics of the intervention matter as much as the currency move itself. Rather than relying on substantial sales of U.S. government debt, American and Japanese authorities used other assets and Federal Reserve infrastructure to obtain yen and dollar liquidity.
Why Washington and Tokyo Avoided Treasury Sales
On the U.S. side, the Federal Reserve Bank of New York sold euros to purchase yen rather than selling dollar-denominated securities, according to the account cited by Fortune. Eichengreen argued that this reduced the risk of adding more Treasury supply to markets already absorbing heavy government borrowing.
The concern is particularly relevant as the U.S. government finances a budget deficit expected to reach about $2 trillion this fiscal year. Corporate borrowing is also competing for investor capital, including substantial debt issuance linked to the expansion of artificial intelligence infrastructure.
Japan took a different route. Rather than selling part of its large Treasury portfolio to raise dollars, Tokyo used the Federal Reserve’s Foreign and International Monetary Authorities Repo Facility, known as FIMA.
The facility allows approved foreign monetary authorities to temporarily exchange Treasury securities for dollars through repurchase agreements. The Federal Reserve describes FIMA as a liquidity backstop designed to give foreign official institutions access to dollars without forcing them to sell Treasuries in the open market.
Eichengreen sees the decision to avoid outright Treasury sales as a potential warning about the dollar’s reserve role. If major official holders become constrained in how readily they can liquidate U.S. government securities, he argues, one traditional advantage of holding those assets becomes less compelling.
Dollar Reserves Still Dominate the Global System
The latest reserve data provide an important counterweight to that argument.
International Monetary Fund figures show the dollar accounted for 57.13% of reported global foreign exchange reserves in the first quarter of 2026, up from 56.42% in the previous quarter. Total global foreign exchange reserves stood at $13.10 trillion. The IMF said exchange-rate valuation effects accounted for roughly half of the quarterly increase in the dollar’s share.
That means the immediate evidence does not point to a rapid abandonment of the dollar. Instead, the debate concerns the longer-term qualities that made dollar assets attractive to reserve managers in the first place, particularly liquidity, market depth and ease of use during periods of financial stress.
There is also another interpretation of FIMA. The Federal Reserve created the facility in 2020 specifically to reduce the need for foreign central banks to sell Treasuries when they need dollars, then made it permanent in 2021. From that perspective, the mechanism can be viewed as infrastructure supporting dollar demand rather than evidence of declining dollar power.
Goldman Sachs strategists made a similar case, according to Fortune. They argued that the availability of FIMA demonstrates the scale of the financial infrastructure supporting the U.S. currency and the difficulty rivals face in matching its network advantages.
Gold Could Gain From Reserve Diversification
Gold remains an important part of the discussion because central banks have spent years increasing their exposure to the metal while managing risks ranging from inflation and fiscal pressures to geopolitical tensions.
Kieran Tompkins, senior climate and commodities economist at Capital Economics, argued that efforts to discourage Treasury selling could make gold relatively more attractive to reserve managers. If central banks conclude that dollar assets carry practical constraints during currency interventions, demand for alternative reserve assets could receive another incentive.
That does not necessarily imply a sudden move away from the dollar. The IMF’s latest figures show that its share of foreign exchange reserves remains broadly stable, while no single alternative currency currently approaches the dollar’s position.
Treasury Liquidity Is Now the Signal to Watch
The next test will be whether the intervention proves to be an unusual response to current market conditions or establishes a precedent for future currency operations.
Investors will also be watching long-term Treasury yields, foreign official holdings of U.S. debt and central bank demand for gold. A gradual change in reserve allocation would matter more than any single intervention.
The larger question is therefore not whether the dollar is about to lose its leading position. It is whether policymakers can preserve the liquidity and freedom of use that helped make dollar assets the preferred reserve choice in the first place.
