The U.S. Treasury Department has informed banks that it might make currency trades on Friday to support the Japanese yen and strengthen its exchange rate against the dollar, according to a person familiar with the matter.
The message was delivered by the Treasury to major banks on Friday via the New York Fed, which acts as the Treasury's agent for trades in financial markets. Some banks were told to have executable trades ready to exchange Japanese yen for euros, according to people familiar with the matter. The U.S. holds some of its foreign-currency reserves in euros.
The alert comes amid what investors speculated could be a coordinated international effort to strengthen the Japanese yen against the dollar, in which Japanese authorities have also taken part.
Reuters previously reported the alert to banks from the Treasury.
In recent trading, the yen was stronger than 160 to the dollar, strengthening from Thursday morning when it traded near 164 to the dollar. Currency traders broadly believe that the yen's strengthening reflected yen purchases by Japanese authorities, as well as speculation of a possible U.S. intervention.
Japanese Finance Minister Satsuki Katayama on Friday declined to comment on Japan's market moves. She highlighted international awareness of the yen's slide, and said it was meaningful that U.S. Treasury Secretary Scott Bessent has warned of the yen's undervaluation.
Given the sheer scale of the suspected Japanese intervention so far -- estimated to amount to as much as $70 billion -- and the relatively limited yen strengthening that has resulted, American and Japanese authorities are running the risk that a coordinated intervention wouldn't succeed, said James Malcolm, a London-based analyst at JB Drax Honoré.
"Credibility is the most important thing for any government authority, and this risks wasting that credibility," Malcolm said. Many currency traders are taking the opportunity to upsize their bets that the yen will continue to weaken despite the suspected efforts by authorities, he said.
Under Bessent, the Treasury has at times taken a more active role in shaping key exchange rates. In January, the Treasury instructed the New York Fed to reach out to banks for quotes on dollar-yen trades, a step known as a rate check often used to signal that a currency intervention might follow.
In October, the Treasury also stepped in to strengthen the Argentine peso in a bid to support the economic reforms of President Javier Milei, an ally of President Trump's.
Even after Friday's strengthening, the yen is down more than 5% against the dollar over the past 12 months. In an interview on Fox Business on Thursday, Bessent said that the U.S. wants to see a more stable yen, a currency that has weakened substantially against the dollar in recent years to near multidecade lows.
"The Japanese yen seems very undervalued to me," Bessent said. "The currency is very cheap. The economy is doing well."
Bessent said Friday on social media that he enjoys a "strong relationship and close coordination" with Japanese officials, and that he plans to meet with Bank of Japan governor Kazuo Ueda next month at a gathering of major-economy finance ministers in Asheville, N.C.
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