U.S. Treasury buys yen in rare July intervention, Fed reports no solo Q3 FX action
Washington steps into the currency market in the July-to-September quarter as Japanese authorities move to curb sharp volatility in the yen. The operation marks the first U.S. yen-buying intervention since 1998 and underscores coordinated support with Tokyo for the Japanese currency.
Highlights
- On July 31, the New York Fed bought 79.4 billion yen (about $497.37 million) in the spot market, marking the first U.S. yen-buying intervention since 1998.
- Japan's Ministry of Finance intervened with 15.4 trillion yen during the quarter, coordinated with Washington, to counter excessive volatility in the yen.
- Post-intervention, the yen strengthened rapidly as the dollar-yen rate fell from around 164 to 155 per dollar between July 30 and August 3, with a 2.3% rise on July 30.
Quarterly operations and intervention details
As reported by Reuters, citing the Federal Reserve Bank of New York, the U.S. Treasury buys Japanese yen during the quarter through operations carried out by the New York Fed as the government's fiscal agent, while the Federal Reserve undertakes no foreign exchange intervention on its own behalf.The New York Fed's quarterly report says the action is aimed at countering what the U.S. Treasury views as disorderly moves in the yen. On July 30, press reports say the New York Fed requests rate checks on the dollar-yen market, which the report says are conducted solely on behalf of the Treasury.
On July 31, the New York Fed buys 79.4 billion yen, worth about $497.37 million, in the spot market and sells euros from the Exchange Stabilization Fund. The report says the purchase is the first U.S. intervention to buy yen since 1998.
Coordinated support and market impact
Washington acts alongside Tokyo in the operation, according to the New York Fed report. Japan's Ministry of Finance intervenes in the amount of 15.4 trillion yen during the quarter to counter what it sees as excessive volatility and disorderly moves in the Japanese currency.The yen strengthens quickly after the intervention. Between July 30 and August 3, the dollar-yen rate falls from around 164 yen per dollar to around 155 yen per dollar, the report says, while the yen rises 2.3% against the dollar on July 30.
After the joint operation, Treasury Secretary Scott Bessent says the U.S. will do "whatever it takes" to support Japan's effort to stabilize the yen.
Earlier, we outlined how AI supply-chain concerns drove sharp swings in the Nasdaq 100 despite a near-2% rebound.
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