- The U.S. Treasury has informed a number of banks that it may intervene in the Japanese yen market on Friday and that they should "stand ready for future action," a source familiar with the matter told Reuters.
- The notice to banks, channeled through the Federal Reserve Bank of New York, comes a day after Japanese authorities stepped in to prop up the yen, setting the currency up for its biggest weekly rise since February, pulling it off of four-decade lows against the dollar.
- News of the potential intervention by the U.S. Treasury pushed the yen higher against the dollar, which last traded at 159.61 to the dollar.
- Thursday saw not only surprise yen purchases by Japan at around $53 billion but also calls by American authorities to banks for quotes on the yen’s rate.
- Such rate checks are viewed as a sort of precursor to intervention, marking the second time this year the US had done that.
- The maneuvers prompted a swift gain of as much as 3.3% for the yen against the dollar in New York trading.
- Cooperation between the US and Japan to buttress a flailing yen appears to be tightening to a degree unseen in decades, with the two sides jointly pushing back against moves in the global foreign exchange market.
- BoJ data suggest Japan intervened to support the yen on Thursday, showing an expected shortfall of 8.2 trillion Yen in money market conditions.
The U.S. Treasury's recent communication to banks indicates a readiness to intervene in the Japanese yen market, a move that follows Japan's own efforts to stabilize the currency.13
On Thursday, Japan intervened with approximately $53 billion to support the yen, which had been trading at four-decade lows against the dollar.4
The U.S. Treasury's notice, relayed through the Federal Reserve Bank of New York, urged banks to "stand ready for future action," signaling a coordinated approach to address yen volatility.2
This collaboration between the U.S. and Japan is unprecedented in recent decades, as both nations work together to counteract fluctuations in the global foreign exchange market.
Following the announcement, the yen experienced a notable increase, trading at 159.61 to the dollar, reflecting a swift gain of up to 3.3% in New York trading.6
BoJ data revealed an expected shortfall of 8.2 trillion yen in money market conditions, highlighting the urgency of intervention measures.8
The recent actions underscore a significant shift in U.S.-Japan relations regarding currency stabilization, marking a new normal in their economic cooperation.
“Japan stepped in on Thursday with around $53 billion in surprise yen purchases, pulling the currency off four-decade lows. The US notice, channeled through the NY Fed, told banks to stand ready for future action, with BoJ data showing an 8.2 trillion yen shortfall.”
