On Friday, the United States stepped into currency markets to buy Japanese yen alongside Japan a move not seen since 1998. This rare intervention aimed to halt the yen’s plunge, which recently neared a 40-year low against the dollar.
The yen had dropped to 163.99 per dollar last week, prompting Japan to act first by selling dollars to boost its currency on Thursday. The US Treasury followed suit the next day, with the New York Fed selling euros and purchasing yen through major banks like Goldman Sachs and Morgan Stanley, according to the Financial Times.
The result was a sharp rebound. The yen closed at 157.40, its strongest level since early May. This coordinated action shocked currency watchers not only because US involvement is extremely rare only three prior times since the 1990s but also due to the scale. Treasury Secretary Scott Bessent’s notes revealed plans to buy between $5 billion and $10 billion of yen, up to twelve times the amount spent in 1998.
Ripple Effects on Markets and Crypto
This intervention influences more than just foreign exchange. The yen’s weakness had been a key funding currency for major carry trades globally. When Japan and the US joined forces to stabilize it, those trades started to unwind, impacting risky assets, including cryptocurrencies.
Bitcoin responded immediately, briefly dipping below $63,000 as traders adjusted. This shakeup followed recent volatility in digital assets driven by fluctuations in traditional markets. Market participants also noted Bitcoin’s struggle near $63,000 amid ETF outflows, reflecting broader uncertainty triggered by macroeconomic events.
