August 18, 2026 · Decision research
Currency Regime FX
Finding
The weakest assumption was that dollar softness is already becoming a funding disorder. The evidence does not support that escalation: the New York Fed says the broad dollar was little changed in Q2 2026, and the Fed and Treasury did not intervene in FX markets [120.2-3]. Current central-bank liquidity swaps were $132 million on August 12, down $13 million week over week [158.35].
What changed
The latest flow and positioning evidence is more mixed than a simple dollar-exit story. June TIC data show a $150.7 billion net inflow and $162.1 billion of net foreign private inflows, while leveraged funds were net short euro FX by 60,600 contracts, net long British pounds by 40,670, and net long the ICE US Dollar Index by 5,772 [157.3][157.52-54].
Decision
Do not change the action now. Keep trim_or_hedge at its current intensity; do not add a much larger hedge, but do not reverse it or treat the dollar as risk-free. The evidence supports a measured, conditional hedge rather than an emergency regime break.
Watch next
The decision changes if funding stress and capital-flow deterioration appear together: rising swap-line usage, materially wider cross-currency basis, sustained negative private TIC flows, and synchronized appreciation of both advanced and emerging-market currencies against the dollar.