US Treasury Secretary Tries to Preserve Global Funding Tap

The value of Japan's yen has dropped to near 160 against the US dollar, despite intervention by both countries last month.

America wants to keep the cheap funding pipeline for global finance flowing through Japan's ultra-cheap money supply, which benefits US markets. The 'carry trade' allows bankers to borrow yen, sell them for dollars, and buy higher-returning US assets like tech shares, contributing to rising American stock markets.

The Trump administration has stepped in to help Tokyo stabilise its currency with at least $10bn in euro sales and yen purchases. However, this move is seen as an attempt by the US treasury secretary, Scott Bessent, to preserve a cash spigot that benefits US markets rather than rescue the yen.

The 'carry trade' has become one of the reasons for AI's massive funding requirements, with research suggesting it sucks up over 1% of US GDP. The US wants to keep this tap open without causing a collapsing yen or US treasury sales. However, traders are probing US resolve as rising oil prices and Japan's inflation weaken the yen.