US Treasury Reportedly Used Euros, Not Dollars, to Fund Yen Intervention

The US Treasury may have funded its recent yen buying intervention using euros rather than dollars, according to currency strategists, a choice seen as a way to avoid signaling a weaker-dollar policy. Two major US banks were reportedly asked by the New York Federal Reserve to check yen-euro exchange rates on Friday, with the Fed selling euros to purchase yen on the Treasury’s behalf.

Strategy Marks Shift From Past Intervention Approach

Analysts said the approach differs from previous US market interventions, which typically involved selling dollars directly. Using euros instead allows the Treasury to support Japan’s currency without appearing to undermine its own strong-dollar stance, a policy considered important under Group-of-20 currency agreements.

Move Draws Mixed Reactions From Currency Strategists

Some strategists said the tactic, while effective, is not a good look for the Treasury, since any eventual reallocation back into euros would still involve indirectly selling dollars. Others noted the primary goal appeared to be supporting Japan’s request to curb yen weakness rather than deliberately pressuring the dollar.

The euro has slipped about 4% against the yen since Japan began its intervention efforts on July 30, though the broader euro index remains near its highest level since mid-June.