Dollar Plunges as Tokyo and Washington Intervene on Yen

The US dollar has dropped against the yen following a joint intervention by Japan and the Trump administration. The Treasury Department sold off euros for yen on Friday, with Goldman Sachs and Morgan Stanley acting as intermediaries. This move was made to counter 'excessive volatility' in the Japanese currency.

Treasury Secretary Scott Bessent confirmed the intervention, stating that it aimed to push back against disorderly yen movements. He added that the Federal Reserve Bank of New York's Foreign and International Monetary Authorities (FIMA) Repo Facility could provide up to $60 billion in US dollar loans for up to seven days.

The drop in the dollar has significant implications, as a sharp increase in the yen could lead Japan to sell portions of its US Treasury holdings. This would directly push up US bond yields, increasing federal borrowing costs and potentially destabilizing the wider US financial market.