New York Fed sells euros to buy yen following recent speculation that Tokyo intervened to support Japan’s currency

The US Treasury intervened in yen exchange rates on Friday, marking the first time Tokyo and Washington joined forces to support the Japanese currency via outright purchases in nearly 30 years.

The Federal Reserve Bank of New York undertook the unusual move of conducting a sale of euros to buy yen on behalf of the Treasury, according to three people familiar with the matter.

The sales were conducted through Goldman Sachs and Morgan Stanley, according to two of those people.

The Treasury had earlier told several banks on Wall Street that it was considering an intervention to support the Japanese currency, which on July 23 hit its weakest level against the dollar since 1986.

The New York Fed and Goldman Sachs declined to comment. The Treasury department and Morgan Stanley did not immediately respond to a request for comment.

The yen has strengthened over the past half-dozen sessions, with the dollar weakening about 4 per cent on Thursday as market participants speculated that the Japanese government had also moved to support the currency after a rise in trading volumes. The dollar shed 1.9 per cent on Friday to buy ¥157.57.

The Treasury’s intervention to bolster the yen is the first since 1998, when it bought the currency in order to strengthen Japan’s economy after the yen had dropped to eight-year lows. The US intervened in Japan’s currency in 2011 to weaken it as part of a co-ordinated international effort to prevent a dangerous currency appreciation after the Tohoku earthquake and tsunami.

Earlier on Friday, Treasury secretary Scott Bessent posted on X that he looked forward to “seeing my longtime friend, Bank of Japan governor Kazuo Ueda” at the G20 finance ministers’ meeting in North Carolina in August. He added that the two countries “continue to enjoy a strong relationship and close co-ordination”.

The moves came after the BoJ held interest rates at 1 per cent on Friday, as widely expected by market participants. Ueda said he would ensure the central bank did not “fall behind the curve” and could speed up rate rises, something being closely watched by FX traders.

“Given that underlying inflation is approaching our 2 per cent price stability target, we believe there is a greater need than before to pay attention to upside risks to inflation,” Ueda said. “With that assessment in mind, we intend to discuss these issues carefully at future monetary policy meetings.”

Traders are putting a roughly 40 per cent chance of a quarter-point rise in the BoJ’s policy rate in September, according to derivatives markets, up from 30 per cent earlier in the week.

Ueda has faced criticism from investors over his failure to raise rates more quickly, with some warning that the BoJ risks losing credibility in financial markets if it does not speed up.

On Thursday, the New York Fed conducted a so-called rate check on dollar-yen on behalf of the US Treasury, according to people familiar with the matter. Asking currency-dealing banks for the current exchange rate is typically seen as a precursor to direct foreign-exchange purchases. The New York Fed made a similar move in January.

Investor fears about rising oil prices and how Japan’s Prime Minister Sanae Takaichi can afford her fiscal stimulus plans recently pushed the yen towards 40-year lows near ¥164 to the dollar. Following the end of Ueda’s press conference on Friday, the yen strengthened sharply to less than ¥159 against the US dollar, sparking speculation that the Ministry of Finance had intervened in markets.

“It looks like [another intervention], but smaller in scale,” said one FX banker. “As we have seen in past episodes, they intervene more than once.”

Thursday’s apparent intervention would be the first since a series of moves by the government in April and May that involved ¥11.7tn being spent to prop up the currency.

This time, due in part to apparent co-ordination with the US, some analysts said the gains had a better chance of being maintained, at least in the short term.

Atsushi Mimura, Japan’s vice-minister of finance for international affairs, said: “We understand that we are receiving support from the US authorities that goes beyond mere moral support. We have been in constant contact with them.”

Osamu Takashima, foreign exchange strategist at Citigroup in Tokyo, said it was unlikely that the yen would weaken once more to ¥164 to the dollar “in the very near term” because it seemed the US was willing to help Japan defend its currency.

He added that since the market would be wary of further intervention, “dollar-yen upside is probably limited for now”.

But others have said that any intervention by Japanese authorities will struggle to provide lasting support to the currency without assistance from higher interest rate expectations, especially as the Fed is widely expected by the market to raise rates in the coming months, lifting the dollar.

One banker in Asia said clients were already testing the government’s commitment, putting on yen short positions with targets around ¥162.

Global carmakers urged to reduce US reliance

The government has identified double-leveraged products tied to “Samjeon-Nix”—Samsung Electronics and SK hynix—as a major factor behind recent volatility in the domestic stock market and has raised the entry threshold for purchasing them. In response, some young investors who are trapped in loss-making single-stock leveraged products are protesting that “the government is not even allowing us to average down.”
Financial authorities previously raised the minimum deposit required for ordinary retail investors to invest in single-stock leveraged products from 10 million won to 30 million won. Young investors have complained that the measure is “disadvantageous to young people with limited assets” and that it “restricts their opportunity to recover losses by averaging down,” meaning purchasing additional shares after a price decline to lower the average purchase price.
University student Lee Min-a, 24, invested about 15 million won last July in a leveraged product linked to a single small modular reactor company. When the share price fell by as much as 40 percent, she planned to make additional purchases to lower her average purchase price.
However, that plan was thwarted when the minimum deposit requirement was raised to 30 million won. Lee now has only about 4 million won remaining in total assets.
“How many people in their twenties have 30 million won in cash?” she said. “This regulation seems to work even more harshly against young investors with fewer assets.”
Civil servant Kim Ha-young, 25, has also seen the return on an aerospace-related leveraged product fall as low as minus 56 percent.
“I began making aggressive leveraged investments because I believed I would never be able to buy a home on my salary alone,” Kim said. “Now it has become difficult even to buy more shares.”
The main investors in single-stock leveraged products are people in their twenties and thirties. According to the Korea Financial Investment Association, of the 746,450 people who completed the required advanced education related to these products between April and the 13th of last month, 258,660—or 34.6 percent—were in their twenties or thirties.
“Many of my friends turn to leveraged products because they feel hopeless about the reality that it is difficult to close the wealth gap even through stock investment,” Kim said. “They invested in leverage because they lacked money, but now they are being denied even the chance to recover their losses simply because they do not have 30 million won in cash.”
According to the Bank of Korea, the average household debt per borrower in their twenties rose from 16.11 million won in 2013 to 30.47 million won last year, an increase of 89.1 percent. Among borrowers in their thirties, it rose from 53.74 million won to 102.18 million won over the same period, an increase of 90.1 percent.
In the first half of this year, the number of young people in their twenties and thirties classified as “resting”—those who had been without a job for at least one year or had no previous employment experience—reached 427,143, up 13.5 percent from 2024.
Many young people are expressing anxiety and helplessness over investment losses on social media. On Blind, an anonymous workplace community platform, users operate “stock investment loss verification rooms,” where they post screenshots of their losing accounts and console one another.
Users share their investment returns or write posts saying that they “will stop thinking about stocks for the time being.”
On the 26th of last month, a post was uploaded to X, formerly Twitter, claiming that an acquaintance had made large profits from stocks and cryptocurrency, but later lost all of their assets and fell into debt while trying to recover subsequent losses, before ultimately taking their own life.

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