US Treasury May Use Euros to Intervene in Yen

On August 3, strategists indicated that the U.S. Treasury might use euros instead of dollars to fund its yen purchasing plan, in order to avoid depreciation of the local currency and maintain a strong dollar policy. Sources revealed that the New York Federal Reserve Bank requested at least two major U.S. banks to inquire about the yen-to-euro exchange rate last Friday. David Forrester, a senior strategist at Crédit Agricole in Singapore, pointed out that the U.S. does not want to be seen selling dollars, as maintaining a strong dollar policy is its goal. He stated that selling dollars is not a good look, which is why they opted to use euros. Jason Wong, a currency strategist at the New Zealand Bank in Wellington, added that the end effect is the same; funds will eventually need to be reallocated back to euros, which may imply that the U.S. will ultimately still sell dollars, albeit in a less transparent manner.

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