US Warns Banks of Possible Yen Intervention

The US Treasury has reportedly warned banks about possible yen intervention, sending a signal to markets that Washington may soon enter the Japanese currency market.

The warning comes as the yen has strengthened against the dollar after reaching its weakest level in four decades earlier this week. The currency traded around ¥159.61 per dollar on Friday, up from approximately ¥163.94.

An intervention to support the yen would involve the New York Fed's trading desk selling US dollars and purchasing Japanese yen under instructions from the Treasury. However, such an operation would carry significant consequences, including potentially forcing investors to reconsider billions of dollars in trades financed with low-cost yen borrowing.