Dollar Plunges as Japan and US Team Up to Stabilize Yen
The US dollar has experienced a significant drop against the yen following a joint intervention between Japan and the Trump administration. As of Monday morning, the dollar sits at 156.80 yen, down from its 40-year high of 164 yen in July.
The Treasury Department's decision to sell off euros for yen on Friday was part of this effort to intervene on behalf of Tokyo's deflating currency. The Financial Times reported that the amount of euros used to purchase yen was not disclosed, but Goldman Sachs and Morgan Stanley were involved in conducting these sales.
Treasury Secretary Scott Bessent confirmed that the Treasury remains attentive and will participate in further joint intervention if necessary. He emphasized that the Foreign and International Monetary Authorities (FIMA) Repo Facility is an important backstop for countries facing exchange rate volatility, allowing them to temporarily exchange U.S. Treasury securities for U.S. dollars.
The intervention aims to counteract extreme currency swings, which have already affected Japan due to the ongoing energy crisis. The sharp drop in the yen could also impact the stability of the yen-carry trade investment strategy and influence Tokyo's decision on its US Treasury holdings.