US-Japan Yen Intervention Sparks Global Market Rebalancing

The United States and Japan have unexpectedly aligned to support the Japanese yen on foreign exchange markets. This joint effort has led to a sharp shift in the euro's exchange rate, with the euro falling against major G10 currencies.

According to banking analysts, the US Treasury used euros for the operation to avoid weakening the dollar. As a result, the euro lost approximately four percent against the yen within just a few days.

The yen has been under pressure due to Japan's continued supply of its currency to the market and higher global oil and natural gas prices. This has led to a decline in demand for the yen, causing it to weaken.

To prevent further decline, the Bank of Japan began selling US Treasury securities and using the proceeds to buy yen while raising its benchmark interest rate above zero. Private investors followed suit by selling US government bonds to repay yen-denominated loans.