US Treasury Warns Banks of Potential Yen Intervention
The US Treasury has informed several banks that it may intervene in Japan's yen market as early as Friday, according to a source familiar with the matter. This comes just one day after Japanese authorities stepped in to prop up the yen, which had reached four-decade lows against the dollar.
The notice was reportedly channeled through the Federal Reserve Bank of New York and told banks to 'stand ready for future action'. The method of potential Treasury intervention is unclear, but it's been done before - most recently in 2011 as part of a coordinated effort by G7 countries after Japan's devastating earthquake and tsunami.
Japan's top currency diplomat Atsushi Mimura hinted at US involvement in the effort to stem the yen's decline, saying that 'the U.S. support goes beyond psychological support.' The Reuters report of Treasury's notice has added to market nervousness, with some analysts calling it a precursor to further intervention.
US Treasury Secretary Scott Bessent told Fox Business Network earlier this week that the yen 'seems very undervalued' and that Japanese Prime Minister Sanae Takaichi was enacting strong policies that would help Japan's economic fundamentals. He also noted that excess volatility in the yen isn't healthy, saying it has 'substantially overshot what would be called an equilibrium price.'