US Treasury Intervenes to Support Japanese Yen in Coordinated Action, FT Reports

The U.S. Treasury Department intervened in currency markets on Friday by purchasing yen, a move that aligns with Japan's efforts to support its currency from near four-decade lows, the Financial Times reported.

Details of the Intervention

According to the FT report, which cited people familiar with the matter, the Federal Reserve Bank of New York executed the transaction on behalf of the Treasury. The operation involved selling euros to purchase yen. The trades were reportedly conducted by Goldman Sachs and Morgan Stanley.

This action followed a warning from the Treasury to several banks earlier on Friday, asking them to “stand ready for future action,” a person familiar with the matter told Reuters. Reports of the potential U.S. intervention helped strengthen the yen against the dollar during Friday's trading session.

A Coordinated Effort

The U.S. move marks a significant escalation in the campaign to stabilize the Japanese currency. It follows an apparent large-scale intervention by Japanese authorities on Thursday.

Ad

Data from the Bank of Japan indicated that Japan may have spent as much as $58.97 billion selling U.S. dollars to purchase yen in its own effort to curb the currency's persistent slide.

Market Context

The yen's prolonged weakness has created economic challenges for Japan, increasing the cost of imports and contributing to inflationary pressures. While a weaker yen can benefit the country's export-oriented companies by inflating the value of overseas profits, the rapid decline has raised concerns among policymakers in Tokyo.

When contacted for comment outside of regular business hours, the U.S. Treasury, the New York Fed, and Morgan Stanley were not immediately available, according to the source report. Goldman Sachs declined to comment.