BIS: If there is a large-scale liquidation in the foreign exchange swap market or a dollar grab battle ensues.

The Bank for International Settlements (BIS) has stated that the turbulence in the US market may trigger a competition for the US dollar once investors start unwinding their positions in the $113 trillion foreign exchange derivatives market. Shin Hyun-song, head of the BIS Monetary and Economic Department, pointed out that simultaneous selling of US stocks, bonds, and the dollar is highly unusual. However, it is still too early to determine whether major investors are selling US assets or just hedging their positions. Nevertheless, he believes that investors are likely considering strategic adjustments. Shin Hyun-song also noted that if investors suddenly rush to unwind these positions, problems could arise. Investors with hedged positions typically hold euros or yen but still have obligations to repay in dollars. If they need to extend these derivatives, they will have to join the competition for dollars, potentially leading to a rapid appreciation of the US dollar.