USA conducted a currency intervention with euros without ECB approval, sources say

The United States used part of its euro reserves to support the Japanese yen without warning the European Central Bank in advance. Frankfurt learned about the currency operation only after it was conducted, the Financial Times reports, citing informed sources.

On Friday, the U.S. authorities sold euros and purchased yen. The operation was carried out by the Federal Reserve Bank of New York on behalf of the U.S. Treasury. Next day, ECB President Christine Lagarde discussed the intervention with U.S. Treasury Secretary Scott Bessent.

This was the first joint Washington-Tokyo operation to support the yen in almost 30 years. Usually the U.S. uses dollars for fx interventions, but this time Washington sold euros. Selling the U.S. currency might have been perceived by the market as an attempt to weaken the dollar, which would contradict Bessent’s policy of a strong dollar.

Some senior ECB officials viewed the U.S. action as an unprecedented breach of longtime cooperation rules among Western central banks. Previously, large-scale fx interventions were typically conducted after consultations and coordination among the relevant regulators.

The U.S. Treasury said it is not obliged to coordinate the allocation of Exchange Stabilization Fund reserves with foreign authorities. The decisions are based on market liquidity, asset valuations, and other economic factors.

Analysts also suggest that Washington decided to support the yen so that Japan would not need to sell U.S. government bonds. The long-term U.S. borrowing cost is currently near the highest level in 19 years.

Following the U.S. and Japan interventions, the yen strengthened to about 158 per dollar. In early August, the rate approached 164 yen per dollar — the yen’s weakest level since 1986.

Earlier it was reported that Japan might have spent $34.5 billion on a previous fx intervention when the yen approached the psychological 160 per dollar mark.

USA carried out fx intervention with euros without ECB approval, sources say

Based on materials from: Financial Times