Washington reportedly conducts first yen-buying intervention with Tokyo in more than a decade as Japanese currency falls near 40-year lows.
Aug. 1 (Reuters): The US Treasury reportedly bought Japanese yen on Friday to support the weakened currency after Japan stepped up efforts to curb its decline, the Financial Times reported.
The reported move marked Washington’s first yen-buying intervention with Japan in more than a decade, as the yen remained under pressure and traded near levels not seen in about 40 years.
According to the FT report, the Federal Reserve Bank of New York sold euros for yen on behalf of the US Treasury through Goldman Sachs and Morgan Stanley. The report did not disclose the amount of yen purchased.
Why did the US intervene in the yen market?
The reported intervention came after the yen weakened sharply against the US dollar, with the dollar recently rising to nearly 164 yen, its highest level since 1986.
A source familiar with the matter told Reuters that the US Treasury had informed several banks earlier on Friday that it might intervene in the yen market and advised them to remain prepared for possible future action.
A Reuters photograph of Treasury Secretary Scott Bessent’s notepad during a Cabinet meeting at Camp David also showed a note listing “Buy Japanese Yen (JPY) $5-10 bil,” though the Treasury did not immediately comment on the report.
How did markets react to the reported intervention?
News of possible US involvement in supporting the yen helped strengthen the Japanese currency during late trading.
According to LSEG data, the dollar fell to around 157.6 yen shortly before 5pm EDT on Friday, compared with about 158.9 yen earlier in the session.
Japan had already taken steps to support the yen, with central bank data indicating Tokyo may have spent as much as $58.97 billion buying yen on Thursday.
The Japanese Finance Ministry said the country’s monetary authorities had a broad range of tools available to address market liquidity concerns and remained prepared to act when necessary.
What is the significance of the move?
The last time the US directly supported the yen was in 2011, when Washington coordinated with other G7 nations to stabilize markets following Japan’s earthquake and tsunami disaster.
The reported intervention highlights growing concerns among policymakers over excessive currency volatility and the impact of a weak yen on Japan’s economy and financial markets.