Abu Dhabi, United Arab Emirates – September 2026: The UAE’s holdings of US government debt underline the importance of liquid dollar-denominated assets for an economy whose currency is pegged to the US dollar, according to Nagham Hassan, Market Analyst at etoro.
Holdings attributed to the UAE stood at US$114.8 billion in June 2026, just below the peak of around US$120 billion recorded in February and approximately 75% higher than a decade ago, according to US Treasury data.
Nagham Hassan, Market Analyst at etoro, said: “The scale of the UAE’s investment in US Treasuries has a clear economic rationale. Since 1997, the dirham has been fixed at AED3.6725 to the US dollar. Maintaining that peg requires access to liquid dollar assets that can be sold at short notice when needed.
“US Treasuries are particularly well suited to this role because they form the world’s largest and most actively traded government bond market. With the dollar remaining the leading global reserve currency, Treasuries provide dollar-pegged economies such as the UAE with a combination of liquidity, security and income.”
The figures reflect securities attributed to the UAE and do not represent the Central Bank of the UAE’s reserves alone. Nevertheless, they demonstrate the country’s significant exposure to US government debt at a time when global bond markets have experienced heightened volatility.
China has gradually reduced its US Treasury holdings in recent years, while Japan, the largest foreign holder, sold heavily during the first half of 2026. Large-scale selling can place downward pressure on bond prices, reducing the market value of securities held by other investors.
However, the structure of the UAE’s holdings helps limit this exposure. US Treasury data shows that nearly 60% of the portfolio is invested in short-term bills maturing within one year, while the remaining 40% is held in longer-term securities.
“The headline figure may suggest significant exposure to fluctuations in the US bond market, but the composition of the portfolio provides an important layer of protection,” Hassan said.
“Short-term Treasury bills experience relatively limited price movements when yields rise. As these securities mature, the proceeds can also be reinvested at higher prevailing rates. Rising US yields have therefore largely translated into stronger potential returns on this portion of the UAE’s holdings.”
The longer-term portion is more sensitive to changes in interest rates and recorded estimated paper losses of around US$6 billion in 2025. However, these valuation declines only become realised losses if the securities are sold before maturity.
“Reserve assets are generally held for stability and liquidity rather than short-term trading,” Hassan added. “A Treasury security held until maturity repays its full face value, regardless of the price fluctuations it experiences in the secondary market.”
For residents and businesses, the benefits of this reserve structure are most visible through the stability of the dirham against the dollar. The peg helps keep the cost of dollar-priced imports more predictable and reduces currency uncertainty for foreign investors bringing capital into the UAE.
“The peg cannot eliminate inflation or prevent the dirham from moving against currencies such as the euro or Indian rupee when the dollar fluctuates,” Hassan concluded. “What it does provide is certainty over the dirham’s value against the dollar. For an economy built on trade, investment and the movement of global capital, that predictability remains one of the UAE’s most important strengths.”
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