US Treasury Warns Banks of Possible Yen Intervention Ahead of Coordinated Effort

The US Treasury Department has alerted major banks to be prepared for possible currency trades that could support the Japanese yen and strengthen its value against the dollar. According to a person familiar with the matter, the notification was delivered through the New York Fed, which serves as the Treasury's agent for financial market trades.

Some banks received instructions to prepare executable trades to exchange currencies, but it is unclear what specific actions will be taken or when they might occur. The yen has strengthened in recent trading, rising above 160 against the dollar after trading near 164 on Thursday morning.

Currency traders believe the yen's gains are due in part to purchases by Japanese authorities and speculation about potential US intervention. Japanese Finance Minister Satsuki Katayama declined to comment on Japan's market activities, but noted international awareness of the yen's decline and the comments made by US Treasury Secretary Scott Bessent regarding its undervaluation.

James Malcolm, a London-based analyst at JB Drax Honoré, has cautioned that American and Japanese authorities may face an unsuccessful coordinated intervention. He pointed out that the suspected scale of Japanese intervention is estimated to be up to $70 billion, which may not be sufficient to achieve significant yen strengthening.