In a Financial Times op-ed on Tuesday, University of California at Berkeley economist Barry Eichengreen pointed to both sides of the currency intervention, which he said reflected concern about long-term yields going up.

On the U.S. end, the New York Fed sold euros instead of dollar-denominated assets to buy yen. Eichengreen said that allowed the U.S. to avoid calling on financial markets to absorb more Treasury securities.

That’s as the federal government must finance a $2 trillion budget deficit this fiscal year, meaning it’s already issuing a flood of Treasury debt. Meanwhile, it’s also competing against AI hyperscalers who are selling a mountain of their own bonds.

The tsunami of public and private debt as well as the competition for investor demand have put upward pressure on yields, which adds to interest costs and the federal deficit.

On the Japanese side of the intervention, Tokyo also refrained from selling Treasuries and instead tapped an obscure Federal Reserve tool called the Foreign and International Monetary Authorities Repo Facility.

This mechanism allowed Japan, which is the world’s largest holder of U.S. debt, to borrow dollars against its Treasury stockpile, obtaining a limited form of liquidity.

“Both moves are an indication that the dollar’s status as a reserve currency is not what it used to be,” Eichengreen wrote. “Central banks are accustomed to holding foreign reserves in dollars because markets in U.S. Treasury securities are liquid. Central banks hold U.S. Treasuries because they can be freely bought and sold and used in interventions. But not now, at least not in unlimited quantities.”

That’s strikes at the heart of dollar dominance, which is in part derived from the immense size and depth of the U.S. debt market.

But by signaling that Treasuries can’t be used anytime and anywhere, the U.S. gives investors less of a reason to own them.

“The bottom line is that Washington, fearing the consequences for U.S. financial markets, is reluctant to see foreign central banks use their dollar reserves,” Eichengreen concluded. “This is telling us that the dollar is not the attractive reserve currency it once was. When this message sinks in, other countries will redouble their search for more attractive, readily usable alternatives.”

Kieran Tompkins, senior climate and commodities economist at Capital Economics, echoed that sentiment, saying in a note on Friday that the U.S. is raising the relative appeal of holding assets like gold because it pressured Japan to not sell dollar assets.

To be sure, central banks have been filling up their reserves with more gold for years while relying less on dollars. Some of that is unrelated to de-dollarization, such as concerns about fiscal, inflation and geopolitical risks.

But it’s also due to a desire to reduce vulnerability to U.S. sanctions that leverage the dollar’s ubiquity, eroding another pillar of its dominance—namely, as the top currency for international transactions.

“Central bank gold buying has slowed this year, but that is likely in response to soaring gold prices caused by speculative momentum. However, the ability of central banks to conduct FX operations without triggering concerns from U.S. administrations about the impact on U.S. bond markets could provide fresh impetus to central banks’ demand for gold,” Tompkins predicted.

But strategists at Goldman Sachs made the opposite argument about dollar dominance. In another note, they downplayed the fear that the U.S. might try to prevent other debt holders from selling Treasuries in the future.

And Japan’s use of the Fed’s Foreign and International Monetary Authorities Repo Facility is actually a sign of dollar strength rather than weakness.

“We believe Treasury’s actions and the availability and utility of the FIMA facility help demonstrate that no one else can come close to competing with the U.S. dollar’s usefulness, network effects, and supporting infrastructure right now,” Goldman added.