US Fed Sells Euros to Support Yen, Raising ECB Coordination Questions

The US Federal Reserve quietly sold euros from its foreign-exchange reserves to buy Japanese yen in an intervention aimed at supporting the Yen. According to people familiar with the matter, the United States informed the European Central Bank (ECB) about the transaction only after it was completed.

This move adds a new dimension to US intervention in the Yen market, which was first reported on August 1 by the Financial Times. Rather than selling dollars to fund purchases, the US sold euros instead. The Federal Reserve Bank of New York and ECB declined to comment on the matter.

The US Dollar to Yen exchange rate closed at 157.80 on Friday, nearly 6 yen below its late-July peak near 164, following this intervention. MUFG believes that this move could signal a broader turn in the trend, but notes that it is too early to predict with certainty.