Financial stability risks remain elevated amid risks presented by stretched asset valuations, growing pressure in sovereign bond markets, and the increasing role of nonbank financial institutions (NBFIs). Despite its deep liquidity, the global foreign exchange market remains vulnerable to macrofinancial uncertainty. Shocks can raise funding costs, widen bid-ask spreads, and intensify excess exchange rate return volatility. These pressures are amplified by structural vulnerabilities including currency mismatches, concentrated dealer activity, and greater NBFI participation. Stress in foreign exchange markets can spill over other asset classes, tightening broader financial conditions. […]