Treasury Intervention Fails to Stem Yen's Downward Trend Amid Middle East Uncertainty
The US Treasury intervened to support the Japanese yen for the first time since the 2011 earthquake, but the move may not be enough to halt its downward trend. The intervention, coordinated with Japan and Korea, was unexpected as it used EURJPY instead of the more obvious USDJPY pair, avoiding a signal of a lower dollar from the Treasury.
The US sold EURJPY, which surprised Christine Lagarde and the ECB. Half of the shift in USDJPY last week has already been given back, indicating that further intervention will be required to have lasting impact. Japan's MOF bought around $37 billion of JPY in the most recent intervention.
The Middle East situation continues to weigh on markets, with Trump's claims of a deal being reached followed by Iran's denial and Trump's threats of action over the weekend. This pattern has repeated several times, causing investors to take money off the table and leading to market falls on Thursday and Friday.