US Treasury Intervenes to Cap Official Dollar Exchange Rate Amid Global Dollar Dominance

The official U.S. dollar remains dominant in global foreign exchange markets, participating in 89% of all international transactions, as reported by the Bank of International Settlements. Despite this dominance, the dollar has faced depreciation pressures in 2025, driven by expectations of Federal Reserve interest rate cuts following weak U.S. payroll data, which has caused the dollar to drop to multi-month lows. Meanwhile, the euro has experienced volatility with some appreciation against other currencies, influenced by political uncertainty in France and the European Central Bank's decision to maintain interest rates. In Argentina, the Trump administration's use of the Exchange Stabilization Fund to provide financial support, rather than traditional central bank swap lines, raises concerns about the politicization of U.S. financial aid and the implications for global monetary cooperation. This situation underscores broader anxieties about the Federal Reserve's independence and its role in providing dollar liquidity during crises. Overall, while the dollar's central role in FX markets persists, geopolitical events and monetary policies continue to shape currency dynamics and financial stability globally.