The U.S. dollar dropped to 156.80 yen on Monday morning, falling from a 40-year high of 164 yen reached in July.
Driving the news: The decline comes after the Trump administration, in partnership with Japanese authorities, intervened to support the yen and counteract excessive currency volatility.
- The U.S. Treasury Department sold euros for yen on Friday, coordinated by the Federal Reserve Bank of New York and conducted through Goldman Sachs and Morgan Stanley.
What they’re saying: Japanese Finance Minister Satsuki Katayama confirmed Japan also purchased yen to address rapid currency swings.
- Treasury Secretary Scott Bessent emphasized ongoing communication with Japan’s Ministry of Finance and Bank of Japan, and signaled readiness for further joint intervention.
- Bessent highlighted the Foreign and International Monetary Authorities Repo Facility as a key backstop, allowing eligible countries to exchange U.S. Treasury securities for short-term dollar loans.
Zoom in: The intervention follows broader concerns about global financial instability, including an energy crisis and the impact of the Iran war on Asian economies.
- A sharp yen drop could prompt Japan, the largest foreign holder of U.S. Treasury securities, to sell Treasury holdings to defend its currency – potentially driving up U.S. bond yields and federal borrowing costs.
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