The United States conducted a historic currency intervention last week to support the yen, which involved selling euros. This action reportedly blindsided the European Central Bank (ECB), which was only informed after the trade had been executed by the New York Federal Reserve on behalf of the US Treasury. Multiple sources indicate that senior ECB officials viewed this move as an unprecedented breach of long-standing conventions on cooperation between Western monetary authorities, who typically operate with mutual trust and consultation.
ECB President Christine Lagarde and US Treasury Secretary Scott Bessent reportedly discussed the intervention a day after it occurred. The US Treasury, however, stated that it does not coordinate decisions regarding the allocation of reserves within its Exchange Stabilization Fund with foreign authorities. A Treasury spokesperson emphasized that decisions are made by the US Treasury, considering assessments of market liquidity, valuations, and other relevant factors. The US sold euros instead of dollars to avoid undermining its "strong-dollar policy."
European central bankers, including those at the Jackson Hole Economic Policy Symposium, expressed unease over the US actions, viewing them as potentially disruptive to established norms of international financial cooperation. Some officials described the lack of advance notification as "infuriating," suggesting it signaled a unilateral approach by the US. However, other participants noted that the unusual nature of the transaction could have led to an oversight. The intervention helped push the yen higher from almost ¥164 to the dollar to about ¥157, though it has since weakened to ¥158. Analysts suggest Japan alone may have spent approximately ¥13.8 trillion ($87 billion) in its efforts to support the yen.
