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US Treasuries pay in dollars. Buying a Treasury is a bet that dollars will still be valuable in the future. Am I wrong to see the high value (low interest rate) of Treasuries as a consequence of the value of the dollar, not a cause? If people lose faith that the dollar will hold its value, the fact that the US government is willing to pay 1% interest in dollar loans will not help bolster confidence.

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Foreign central banks don’t really care so much about making or losing money on their dollar treasuries. They’re not currency speculators. They care much more about stabilising their currency and economy with respect to the global economy.

I don’t think you can un-pick dollar stability from its desirability. The value of fiat currencies is based solely on confidence, nothing else. You simply can’t say a currency is stable because people are confident in it, or that they are confident in it because it is stable. They are both different ways of saying the same thing. We measure confidence in a currency by analysing how stable it is in the market.

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