US Treasury Sells Euros to Boost Yen in Unconventional Move

The US Treasury Department has taken an unusual step to help boost Japan's yen for the first time in nearly three decades. Instead of selling dollars to buy yen, as is typically done during currency intervention, the New York Fed reportedly sold euros to fund the purchase.

This move lifted the yen to 157 against the dollar on Friday and marked a joint effort between the US and Japan to stabilize their currency. The exact amount from the US is unknown, though Treasury Secretary Scott Bessent's notepad suggests a range of $5 billion to $10 billion.

However, economists warn that this decision could backfire if fundamental issues with the yen aren't addressed. Mark Sobel, a former Treasury official, attributed the yen's weakness to Japan's 'overly accommodative' monetary policy and debt concerns. He emphasized that the US should not intervene without a Japanese plan to tackle these underlying problems.

Others, such as Robin Brooks of the Peterson Institute for International Economics, question the effectiveness of using euros instead of dollars in this intervention. He notes that it may confuse markets and undermine the efficacy of the US participation.