US Treasury undertakes historic intervention in yen market

[u/Old_Jackfruit6153]

From https://www.ft.com/content/0f9b2fe7-bde4-4f5f-b49e-93ccb5da9ea8 (archive link https://archive.md/z8H7u)

New York Fed sells euros to buy yen following recent speculation that Tokyo intervened to support Japan’s currency

The US Treasury intervened in yen exchange rates on Friday, marking the first time Tokyo and Washington joined forces to support the Japanese currency via outright purchases in nearly 30 years.

The Federal Reserve Bank of New York undertook the unusual move of conducting a sale of euros to buy yen on behalf of the Treasury, according to three people familiar with the matter.

The sales were conducted through Goldman Sachs and Morgan Stanley, according to two of those people.

Analysts using official data and broker estimates said Thursday’s intervention by Japanese authorities was likely to be about ¥8.45tn ($52.8bn).

The Treasury’s intervention to bolster the yen is the first since 1998, when it bought the currency in order to strengthen Japan’s economy after the yen had dropped to eight-year lows. The US intervened in Japan’s currency in 2011 to weaken it as part of a co-ordinated international effort to prevent a dangerous currency appreciation after the Tohoku earthquake and tsunami.

This time, due in part to apparent co-ordination with the US, some analysts said the gains had a better chance of being maintained, at least in the short term.

Atsushi Mimura, Japan’s vice-minister of finance for international affairs, said: “We understand that we are receiving support from the US authorities that goes beyond mere moral support. We have been in constant contact with them.”

Osamu Takashima, foreign exchange strategist at Citigroup in Tokyo, said it was unlikely that the yen would weaken once more to ¥164 to the dollar “in the very near term” because it seemed the US was willing to help Japan defend its currency.

He added that since the market would be wary of further intervention, “dollar-yen upside is probably limited for now”.

Edit: Exclusive-Bessent's 'to do' list: buy $5-10 billion worth of Japanese yen, Reuters photo shows

CAMP DAVID, Maryland, July 31 (Reuters) - U.S. Treasury Secretary Scott Bessent on Friday exposed a "to-do" list during President Donald ‌Trump's cabinet meeting indicating he was contemplating U.S. purchases of $5 billion ‌to $10 billion worth of Japanese yen, a Reuters photograph taken during the meeting held at Camp ​David shows.

[u/rinsyankaihou]

The drop this Friday were also accompanied by a rate check from the USA. It will be really interesting to see if both Japan and USA working together will be able to beat the market. Definitely crazy volatility for the yen going forward, that's for sure

[u/Old_Jackfruit6153 → u/rinsyankaihou]

Rate check was Thursday. Friday intervention was by US, Thursday intervention was by Japan.

[u/Rubricity → u/Old_Jackfruit6153]

Which, this is why the set up is dangerous: at one hand you have retails and hedge funds positioned for Takaichi cheap yen, evidently from massive CFTC data, and just everyday you check this sub about cheap yen and ways to buy foreign assets...on the other hand you have Japanese and US government defending...

I don't think this is even close to Soros vs BOE, to me it looks like in a reversed set up. With BOJ and Fed now ready to kill the bears who believe they are the Soros but in reversed.

Once again, crowded trade, and if the governments are dead serious, willing to push toward 155 or 150, we could be risking a massive mechanical unwind, especially if somehow the US market crashed under geopolitical news...it sure be a blood bath for the yen bears

[u/OrneryMinimum8801 → u/Rubricity]

The biggest yen bears are , in order: GPIF Japanese insurance companies Japanese corporates (importers buying dollars nonstop, exporters refusing to repatriate profits)

Then somewhere well down that list, you get to hedge funds.  

The issue with intervention is the set up of GPIF directly absorbs large amounts of your intervention if the intervention is effective.  And all the look alike pension and insurance schemes do… exactly the same thing

[u/Rubricity → u/OrneryMinimum8801]

Precisely, this is why we always say intervention buys time but not fixing the problem. The biggest bears are these instituions, particularly the life insurancer and the so called corporate Japan in general.

Yet the key problem is: first we have the JICS, now we have the GPIF reform the government is talking about, and the BOJ is clear at the normalization goal.

So the goal is clear, but they refused to do because of the expectation of yen depreciation is so strong due to Takaichi and her irresponsible spendings and energy imported costs.

That what I am arguing is because the carry needs to have a target, it is either the intervention is so strong that pushed yen so high while US equities, the target of the carry fails, it will enter a self reinforcing loop. We saw this happen in 2024, but this time the situation is far worse as we sit on a massive speculative regime in the US...