For a detailed breakdown on how the AMM at Fixed Forex works, then please refer to the post here but the TL;DR is that the Keep3r protocol via the AMM contract accesses loan facility from Iron Bank to offer swaps via the AMM. That means Keep3r treasury uses all USD stables received as collateral for the outstanding loans of ibXXX stables that have been sold onwards to end-users.
Liquidity exited the pools due to incentives (mainly CRV) leaving the ibXXX+sXXX pool pairs. This is critical as an equal amount of TVL in these pools helps with the maintenance of peg, whereas ibXXX+USDC doesn’t and chainlink oracles can easily be used as this reference point.
For example, it’s more advantageous to enter any pool whilst off-peg on the synth stable side exclusively, since the user will receive a bonus.
Incentives are now returning to ibXXX+sXXX pools as of votes placed on voting gauge week of July 7th 22 which should go some way towards helping restoration of peg & trust. Especially where these incentives are kept consistent.
I would personally like to see this coupled with additional actions - see here for some ideas/suggestions