New York Fed reveals Treasury’s first yen buy since 1998

The US Treasury bought Japanese yen during the July-to-September quarter, while the Federal Reserve did not intervene in currency markets on its own account, the Federal Reserve Bank of New York said on Thursday, November 12, in its quarterly report to Congress. The report shows that the New York Fed, acting as the Treasury's agent, bought 79.4 billion yen (about $497 million) in the spot market on July 31, according to Reuters.reuters.com+1

This was the first time the US had bought yen to intervene since 1998. It confirms that Washington acted alongside Tokyo to slow a steep slide in the Japanese currency, Reuters reported.reuters.com

How the Operation Worked

The New York Fed paid for the yen by selling euros from the Exchange Stabilization Fund. The purchase was made "to counter what the US Treasury viewed as disorderly moves in the Japanese yen," the report said, according to Reuters. The New York Fed handles foreign exchange trades for the Federal Open Market Committee and, separately, carries out trades as fiscal agent of the United States when the Treasury directs, the bank explains.newyorkfed.org+1

The report also addressed press reports from July 30 that the New York Fed had asked banks for "rate checks" on the dollar-yen rate. It said those checks were made "solely on behalf of the US Treasury." The yen rose 2.3% against the dollar that day, Reuters noted.reuters.com

Japan Did Most of the Buying

Tokyo spent far more than Washington. Japan's Ministry of Finance intervened "in the amount of 15.4 trillion yen" during the quarter to counter what it saw as excessive volatility, the New York Fed said. Between July 30 and August 3, USD/JPY fell "from around 164 yen per dollar to around 155 yen per dollar," according to the report.reuters.com

The US amount was also much smaller than some had expected. A Reuters photo taken at a cabinet meeting at Camp David on July 31 showed a to-do list on which Treasury Secretary Scott Bessent seemed to be considering $5 billion to $10 billion in yen purchases, according to Reuters reporting carried by Zonebourse.zonebourse.com

A Show of Support

After the joint operation, Bessent said the US would do "whatever it takes" to support Japan's effort to stabilize the yen, Reuters reported. The disclosure leaves a question for traders. The US put relatively little money into the operation, but its support was mainly a signal of backing for Tokyo. How much that signal is worth may matter if the yen comes under pressure again.reuters.com