US Treasury Sells Euros to Boost Japan's Yen in Rare Joint Intervention

The US Treasury Department has made a rare move by conducting a coordinated currency intervention with Japan, something that hasn't happened in over a decade. Instead of selling dollars to buy yen, which is the conventional approach, Treasury Secretary Scott Bessent opted to sell euros. The goal was to shore up Japan's battered currency without weakening the greenback.

The operation took place on July 31 and August 1, with the Federal Reserve Bank of New York executing the trades. Goldman Sachs and Morgan Stanley handled the execution, selling euros to purchase Japanese yen on behalf of the US government. The planned scale was between $5 billion and $10 billion worth of yen purchases.

The results were immediate, with the yen strengthening by more than 1% against both the US dollar and the euro on the day of the coordinated action. Bessent described the yen as 'very undervalued,' framing the intervention as a response to what he characterized as unhealthy volatility rather than an attempt to engineer a specific exchange rate.