US and Japan intervene to support yen, selling euros

In late July, the yen fell to nearly 164 per dollar, its weakest in four decades, prompting Japan to intervene in currency markets. The US Treasury joined the effort, but in an unusual move it sold euros rather than dollars to buy yen. This joint operation, the largest in 15 years, helped the yen recover about 4% in a week Source: El Español.

The unusual tactic

Selling euros instead of dollars allowed Washington to support Japan without weakening its own currency, a key concern given inflation. It also avoided encouraging Japan, one of the largest holders of US Treasuries, to sell those bonds to fund intervention. Treasury Secretary Scott Bessent has even proposed expanding the Fed's FIMA facility, which lets central banks borrow dollars using Treasuries as collateral Source: El Español.

A message to Europe

The operation was executed through the New York Fed, but the US did not inform the European Central Bank beforehand, according to the Financial Times. This has been seen as a deliberate signal to Europe, adding a monetary dimension to the Trump administration's broader challenges to the post-war international system Source: El Mundo.

Key facts

• The yen hit 164 per dollar in July, a 40-year low Source: El Español.
• Japan raised interest rates to 1%, a 31-year high Source: El Español.
• The US Treasury's note, photographed at Camp David, showed a plan to buy 5-10 billion yen Source: El Mundo.