US Treasury Sells Euros to Support Yen, Leaving Europe in the Dark

The US Treasury made a surprise move to prop up the Japanese yen by selling euros last week, leaving European policymakers wondering if this was an isolated incident or a sign of things to come.

The sale, which was executed through the New York Federal Reserve, was not coordinated with the European Central Bank (ECB), and the ECB only learned about it after the trade had closed. This break from decades of coordination between Western central banks has raised eyebrows in Europe.

The decision to sell euros rather than dollars was deliberate, according to analysts, as selling dollars might have signaled a retreat from Scott Bessent's strong-dollar policy. The Treasury tapped its euro reserves instead, and the move appears to have been successful in stabilizing the yen at around 158.40.

Some economists argue that the yen carry trade rule no longer holds, adding pressure on policymakers to defend the currency through other means. Others point out that Japan's potential response to the intervention is a major concern, as it could lead to Japan selling US Treasuries in retaliation.