US Dollar Drops Against Yen After Joint Intervention with Tokyo

A joint intervention between Japan and the US Treasury Department has led to a significant drop in the value of the US dollar against the yen. The dollar, which had reached a 40-year high of 164 yen in July, now sits at 156.80 yen as of Monday morning. This move was made in an effort to counteract the 'excessive volatility' observed in recent months.

The Treasury Department sold off euros for yen on Friday through Goldman Sachs and Morgan Stanley, with the exact amount not disclosed by the Financial Times. Japanese Finance Minister Satsuki Katayama confirmed that Japan also purchased yen to stabilize its currency.

US Treasury Secretary Scott Bessent stated that 'Friday's coordinated foreign exchange actions countered disorderly yen movements' and that the Treasury Department is committed to joint intervention with Tokyo to correct the yen's undervaluation. The Foreign and International Monetary Authorities Repo Facility, created during the COVID-19 pandemic, has been identified as a key backstop in this effort.

This move could have significant implications for global markets, particularly given the current energy crisis affecting Japan and other Asian countries. A sharp drop in the yen's value could lead to market liquidations and destabilize the US financial market.