US Treasury Joins Japan in Intervening in Yen Markets

The US Treasury bought Japanese yen for the first time in over two decades to prop up the sinking currency. This move, combined with Japan's intervention on Thursday, effectively halted the yen's sharp decline.

According to a Congressional Research Service briefing, the US last intervened in currency markets in 1998 and has only done so three times since then. The size of this trade is significant, with the Treasury reportedly spending between $5-10 billion, six to twelve times more than the 1998 trade.

The yen's sharp decline was a result of years of sliding value, with it hitting a 40-year low last week before extending lower over the weekend. The US Treasury's move, along with Japan and South Korea's interventions, has stabilized the currency for now, but its impact may be short-lived.

The carry trade, where traders borrow yen at low interest rates and swap them for dollars to buy riskier assets like stocks, bonds, and Bitcoin, was disrupted by the yen's sharp rally. This could have implications for global markets, particularly those sensitive to currency fluctuations.