US Treasury Uses Euros in Yen Support Intervention

The US Treasury may have employed an unconventional approach in its latest foreign-exchange intervention to support the yen. Rather than directly selling dollars, it's reported that the Treasury used euros instead.

This move comes after Japan intervened in the market on July 30 to defend the yen. Since then, the euro has weakened against Group-of-10 currencies, falling around 4% against the yen over the same period.

The Financial Times reported that the New York Fed, acting on behalf of the Treasury, sold euros and bought yen. This approach is seen as an attempt to avoid undermining confidence in Washington's strong-dollar policy by not directly selling dollars.

David Forrester, a foreign-exchange strategist at Credit Agricole CIB, stated that 'the U.S. maintains a strong-dollar policy, so it likely did not want to be seen as trying to weaken its own currency.' This move also aligns with the Group of 20 agreement to avoid exchange-rate manipulation for competitive advantage.