US Sells Euros, Not Dollars, to Support Japanese Yen
The US government has intervened in the foreign exchange market to support the Japanese Yen, but with an unusual twist. Instead of selling Dollars, which would have weakened the USD and potentially added inflation pressure, Washington sold Euros. This deliberate choice was made to avoid signaling a broader devaluation of the Dollar.
By selling Euros for Yen, the US government demonstrated its support for the Japanese currency without explicitly weakening the Dollar. This move is significant, especially given the current economic climate in Japan and the ongoing efforts to stabilize the Yen.
The size of America's participation may have been modest, but analysts at MUFG note that Washington's role was mainly symbolic, intended to send a stronger deterrent to speculative Yen sellers. The intervention also helped to ease selling pressure in the Treasury market as Tokyo plans to use the Federal Reserve's FIMA repo facility instead of selling US government bonds.