US Treasury reportedly buys yen ahead of possible joint policy
The New York Fed reportedly converted euros into yen through Goldman Sachs and Morgan Stanley as Washington and Tokyo considered further measures.
- The US Treasury reportedly bought Japanese yen for the first time in over a decade, an intervention that occurred as the currency neared a 40-year low.
- This purchase is seen as a precursor to a potential joint policy announcement between the US and Japan, possibly as early as next week, aimed at stabilising the yen.
- Evidence for the US purchase includes a Financial Times report and a photograph of a note on the Treasury Secretary's notepad suggesting a plan to buy $
Japan and the United States could set out a policy as early as next week to address the yen’s weakness, Kyodo News reported on Saturday (Aug 1), citing informed sources.
The proposed announcement would seek to deter attempts to take advantage of a further fall in the currency and help steady its value.
That possibility followed a Financial Times report that the US Treasury had bought yen on Friday.
The purchase came as the Japanese currency was near its weakest level in almost 40 years and would mark Washington’s first yen-buying action alongside Tokyo in more than a decade.
According to people familiar with the matter, the Federal Reserve Bank of New York acted on behalf of the Treasury by converting euros into yen.
The exchange was conducted through Goldman Sachs and Morgan Stanley, but the Financial Times gave no figure for the amount involved.
Reuters separately learnt that the Treasury had notified several banks earlier on Friday that it might buy yen and instructed them to “stand ready for future action”.
A Reuters photograph from a cabinet meeting at Camp David in Maryland showed a note on US Treasury Secretary Scott Bessent’s notepad.
Under the words “To Do” was the entry “Buy Japanese Yen (JPY) $5-10 bil.”
The Treasury gave no immediate response to questions about either the Financial Times report or the photograph.
The New York Fed and Morgan Stanley also did not respond outside normal business hours, while Goldman Sachs declined to comment.
Japan may have used as much as US$58.97 billion to buy yen on Thursday, according to central bank figures released on Friday.
Nikkei reported on Saturday, August 1, that Tokyo made another purchase during New York business hours on Friday.
Japanese Finance Ministry officials could not immediately be reached outside working hours.
In a post on X, the ministry wrote that the authorities had “a broad range of tools” available and added, “We remain prepared to use available tools as necessary.”
Possible access to the Federal Reserve’s standing Foreign and International Monetary Authorities Repo Facility, known as FIMA, was listed as one option.
Introduced in 2020 during the COVID-19 pandemic, the FIMA facility allows Japan to obtain dollars without selling US Treasury securities outright.
This could make it easier for Tokyo to pay for further yen purchases.
The reports were followed by an increase in the yen’s value.
LSEG data showed that one dollar bought about 158.9 yen at around 4.14pm EDT and about 157.6 yen shortly before 5pm EDT, or 2100 GMT.
In recent weeks, one dollar had bought almost 164 yen, more than at any time since 1986.
Washington last directly supported the yen in 2011, when it acted with other Group of Seven countries after Japan’s earthquake and tsunami disaster.
Source: Reuters
