The United States reportedly used euros to purchase Japanese yen, an unusual move aimed at preventing further weakening of the dollar, according to analysts and financial news reports. This action involved the Federal Reserve Bank of New York selling euros to acquire yen on behalf of the U.S. Treasury Department. The move suggests a coordinated intervention with Japan to bolster the yen, which has experienced significant volatility.
Japanese authorities also intervened by buying yen and selling dollars during New York trading sessions, with operations totaling an estimated $52.8 billion on one day. This intervention marks the first joint effort between the US and Japan to buy yen since June 1998 and the first coordinated currency market action among major economies since 2011. The US Treasury Secretary, Scott Bessent, confirmed Washington's involvement and signaled a willingness for future interventions if necessary.
The rationale behind the US intervention is multi-faceted. A weak yen makes US exports more expensive, potentially hurting American exporters and giving Japanese exporters a competitive edge. Japan is a major holder of US Treasury bonds, with over $1.1 trillion in assets, and instability in Japan could have broader repercussions. Analysts from JPMorgan, including Junya Tanase and Patrick Locke, noted that the New York Fed requested information on the euro-yen exchange rate from at least two major US banks, indicating preparation for this intervention. The US action also serves as a relatively low-cost insurance policy against wider economic instability that could arise from a significantly devalued yen.
