Utopia Talk / Politics / America to bail out the Japanese yen

Peter Walsh rank

Tue Aug 04 02:48:07 https://th...5194-dollar-drops-against-yen/ Dollar sinks against yen after Trump administration intervention A joint intervention between Japan and the Trump administration has caused the U.S. dollar to sink against the yen. Markets show the U.S. dollar sits at 156.80 yen as of Monday morning after reaching a 40-year high of 164 yen in July. The drop follows the Treasury Department’s decision to sell off euros for yen on Friday in an effort to intervene on behalf of Tokyo’s deflating currency. The amount of euros used to purchase yen was not made clear by the Financial Times, which reported the move launched by the Federal Reserve Bank of New York. Sales were conducted through Goldman Sachs and Morgan Stanley, two people familiar with the matter told the outlet. Japanese Finance Minister Satsuki Katayama confirmed on Sunday that the country also purchased yen to push back on “excessive volatility” observed in recent months. “Friday’s coordinated foreign exchange actions countered disorderly yen movements. Treasury remains attentive and in close communication with our counterparts at MOF [Ministry of Finance] and BOJ [Bank of Japan]. We will not hesitate to participate in further joint intervention,” Treasury Secretary Scott Bessent wrote in a Sunday post on the social platform X. Bessent added that the Foreign and International Monetary Authorities Repo Facility is an “important backstop.” The facility, created during the COVID-19 pandemic, serves as a lending tool that allows approved foreign monetary authorities and central banks to temporarily exchange U.S. Treasury securities held at the Federal Reserve Bank of New York for U.S. dollars. Eligible countries can receive up to $60 billion in U.S. dollar loans for up to seven days, according to Reuters. “We would encourage it to be upsized in the coming months. We strongly support Japan’s decisive market and monetary steps to correct the substantial undervaluation of the yen,” Bessent wrote in the social media post. Extreme currency swings hurt the global market, which has already been plagued with an energy crisis hampering Japan and fellow Asian countries. The Iran war’s impact on the yen could threaten the stability of the yen-carry trade investment strategy where traders borrow Japanese yen at low interest rates to buy higher-yielding foreign assets, risking sharp market liquidations when the yen strengthens. Japan is currently the largest foreign holder of U.S. Treasury securities, according to the Congressional Budget Office. A sharp drop in the yen could push Tokyo to sell portions of its U.S. Treasury holdings to defend its currency, which would directly push up U.S. bond yields, increase federal borrowing costs and risk destabilizing the wider U.S. financial market.

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