U.S. Treasury Secretary Scott Bessent warned that disorderly moves in the yen could force unwinds of positions that destabilize global markets and push up borrowing costs for U.S. households and businesses. He made the comments in a letter defending Washington's joint yen-buying intervention with Tokyo, as the currency resumed weakening back toward 160 per dollar.
Bessent defends the joint intervention
Bessent said disorderly yen moves could trigger "forced unwinds" of positions that risk destabilizing global markets and ultimately raising borrowing costs for U.S. households and businesses. He made the remarks in a letter dated August 27, posted on his X account a day later, responding to Democratic Senator Elizabeth Warren's demand for an explanation of the joint currency intervention with Tokyo last month.
The Treasury conducted the intervention by exchanging foreign-currency assets held in its Exchange Stabilization Fund (ESF) for yen, Bessent said. According to Reuters: "The best-managed crisis is the one that never happens," he said, defending Washington's decision to join Tokyo's efforts to counter disorderly declines in the yen. He compared the move to Treasury's use of the ESF to stabilize Argentina's peso during a moment of acute, short-term illiquidity.
Yen resumes weakening
The post came as the yen resumed weakening against the dollar despite expectations the Bank of Japan could raise interest rates in the near term. Japan and the United States carried out a rare joint yen-buying intervention on July 31, signaling their determination to prevent a selloff in the yen and Japanese government bonds from spilling over into global markets.
While the yen has recovered from a 40-year low near 164 per dollar hit last month, it has weakened back toward 160 after surging to 155.20 shortly after the intervention. The currency briefly slipped below the 160-per-dollar level on Friday, a threshold widely seen as increasing the likelihood of intervention, after comments from Federal Reserve Chair Kevin Warsh revived expectations of a near-term U.S. rate hike.
The Exchange Stabilization Fund is an emergency reserve managed by the U.S. Treasury to stabilize foreign-exchange and domestic financial markets. The Treasury used the ESF last year to help support Argentina's peso market and provide a $20 billion currency swap line aimed at stabilizing the currency.
Source: Investing.com
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