US Treasury Intervenes in Foreign Exchange Market to Support Yen

A recent memo from Treasury Secretary Scott Bessent has revealed signs of US market intervention to halt a sharp decline in the value of the Japanese yen. The move is seen as an effort to resolve the situation by directly purchasing large amounts of yen amid a yen weakness that has proven difficult to reverse despite repeated interventions by Japanese authorities.

The global foreign exchange market saw the yen-dollar rate surge above 163 yen between January 23rd and 29th, reaching its highest level in 40 years since 1986. However, it fell to 160.18 yen on January 30th and then plunged to 157.42 yen on January 31st.

According to Reuters, the US Treasury intervened in the market through the Federal Reserve Bank of New York selling euros and buying yen via Goldman Sachs and Morgan Stanley. The New York Fed, on behalf of the Treasury, inquired with banks about the yen-dollar rate, signaling in advance the possibility of foreign exchange intervention.

Japanese Finance Minister Satsuki Katayama is scheduled to formally announce on January 3rd that the US and Japan took joint action in the foreign exchange market to halt the decline in the value of the yen. This marks the first time since 1998 that the US and Japan have cooperated to appreciate the value of the yen through direct currency purchases.