US Treasury Buys Yen Using Euros in Rare Intervention

The US Treasury's recent intervention in the foreign-exchange market has drawn attention to Washington's broader currency strategy and the risks spreading across global markets.

The move, which was confirmed by the Donald Trump administration on Sunday, involved buying Japanese yen using euros instead of dollars. This is an unusual approach, as the dollar is typically used to finance such operations.

The intervention was aimed at supporting Japan's weak yen, which had fallen to a 40-year low against the dollar. The Treasury informed currency dealers about its intentions in advance, reducing the element of surprise. However, the size of the operation remained modest, with purchases worth $5-10 billion compared to Japan's estimated $36 billion available for the joint action.

Bessent, a former hedge-fund manager, pointed out that this move marks a departure from traditional intervention methods. According to a G10 FX strategist at Standard Chartered, the Treasury's motivation remains difficult to understand, especially after Japan held off on raising interest rates at the last minute.