The "ignored" major market event: US, Japan, and South Korea joint intervention, US Treasury takes "rare" action! Besant quietly "rescues" the market?
This week, the United States, Japan, and South Korea jointly carried out the largest coordinated forex intervention in nearly thirty years. This move not only targets the depreciation pressures of the yen and won, but is alsoseen as an important measure by the US to stabilize the financial markets of its Japanese and South Korean allies and prevent risk spillover.
This intervention covered two major Asian currencies, the yen and the won.Japan and South Korea’s forex authorities supported their local currencies by selling US dollars; the US intervened in the yen exchange rate via non-USD channels by selling euros and buying yen, aiming to ease downward pressure on the yen while avoiding stress on the dollar.
Currently, the Japanese and South Korean markets remain under pressure: the South Korean KOSDAQ index has fallen to its lowest point since October 2022, the technology sector has seen a marked correction, and the yen and won continue to weaken against the dollar. The market is concerned that further depreciation of these currencies could trigger chain reactions in Asian asset markets.
Unlike previous cases where the sole objective was currency stabilization,this coordinated intervention is regarded by the market as a “market rescue” for Japanese and South Korean financial markets. Amid sustained pressure on Japanese and South Korean stocks and significant adjustments in the tech sector, the US aims to stabilize currency expectations, lift market confidence, and avoid further spread of risks.
Both Japan and South Korea are crucial participants in the US semiconductor and AI supply chains; stabilizing their asset markets helps reduce the chance of financial risks being transmitted to the tech industry chain and the US market.
US, Japan, and South Korea Jointly Intervene in Forex Market, Yen and Won Surge in Response
According to the Financial Times,on July 31, the US Treasury, through the New York Fed, commissioned Goldman Sachs and Morgan Stanley to sell euros and buy yen, marking its first direct intervention in the yen in nearly 30 years.
Previously, reports indicated thatJapanese authorities had intervened in the forex market by using approximately 8.45 trillion yen (about $52.8 billion) in a single day on July 30. In addition, according to Reuters,South Korean forex authorities also sold US dollars in the market that day, pushing the won up by 2% in a single session to a nine-month high.
With the tripartite intervention, the dollar/yen exchange rate quickly fell from above 162 to the 157-159 range, with the yen distinctly rebounding from a 40-year low. South Korean Vice Finance Minister Moon Ji-sung stated thatSouth Korea is maintaining close coordination with the US and Japan; Atsushi Mimura, Japan’s Vice Minister for International Affairs at the Ministry of Finance, also said US support had “gone beyond purely moral support.”
US Takes Rare Step to Directly Intervene in Yen, Sends Policy Signal
The US Treasury’s direct involvement in the yen is the change most closely watched by the market this time. Unlike past interventions, which mainly relied on verbal warnings, the US has rarely participated in yen intervention through actual trading.
According to the Financial Times, citing sources,the New York Fed implemented the intervention by selling euros and buying yen through Goldman Sachs and Morgan Stanley. Before the operation, the US Treasury signaled the possibility of intervention to several Wall Street institutions and maintained communication with the European Central Bank.
Ahead of the official intervention, the New York Fed released policy signals for two consecutive days. On Thursday, the New York Fed conducted a “rate check” on the dollar/yen rate—asking traders about current tradable rates without executing deals; on Friday, it switched to a euro/yen “rate check.” The market generally believes thatthis maneuver is seen as a precursor to official intervention.
New York Fed's "Rate Check" Operation Explores New Ways to Intervene in FX Markets
According to BofA Securities FX strategist Alex Cohen’s report,the “rate check” falls between verbal intervention and actual market intervention and is a new tool that the US Treasury began using this year, allowing policy signals to be sent to the market without actually deploying funds. However, he also cautioned that if such measures lack subsequent real action, the market may still retest the credibility of the authorities’ policies.
It’s noteworthy that this time the New York Fed partially chose to operate euro/yen rather than dollar/yen. Analysts believe thatthis shows the US may wish to exert influence through non-dollar channels—reducing depreciative pressure on the yen while not adding pressure to the dollar.
On Japan’s side, authorities had already intervened massively in the currency market. According to official data and market calculations, Japanese authorities used about 8.45 trillion yen (around $52.8 billion) on July 30 to support the yen,marking another large-scale intervention after the approximately 11.7 trillion yen expended between April and May of this year.
US Goal Is Not Simple FX Stability, but Protecting Asset Stability of AI Allies
The significance of US involvement this time may go beyond traditional forex intervention.
BofA strategist Michael Hartnett stated in his latest report thatthe coordinated US-Japan-Korea move is similar to a “Price Keeping Operation (PKO)” in the AI era, with the core goal of avoiding ongoing pressure on assets in AI industry chain ally countries such as Japan and South Korea.
Hartnett believes thatthere are three types of risks the US aims to reduce: First, preventing a sharp depreciation of the yen from causing a steep rise in Japanese government bond yields; second, avoiding financial stress spreading to markets in South Korea, Japan, and other Asian regions; third, reducing the impact of disorderly capital flows on the US bond market.
Recently, pressure in the South Korean market has intensified. The KOSDAQ index has fallen to the lowest levels since October 2022, and major South Korean brokerage stocks have continued to correct.
Meanwhile, enthusiasm for AI investments remains evident. BofA data shows that semiconductor ETFs have attracted around $53 billion of inflows this year; although the Philadelphia Semiconductor Index (SOX) has pulled back recently, investors are still betting on the long-term growth of the AI industry chain.
Hartnett believes thatthe coincidence of coordinated intervention and market adjustment may indicate the end phase of highly leveraged trades. However, current policy is more about containing volatility rather than changing the trend through liquidity measures.
~~~~~~~~~~~~~~~~~~~~~~~~
For more detailed analysis, including real-time interpretations and frontline research, please join [Chasing Wind Trading Desk · Annual Membership]
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
The "debt black hole" behind the AI boom: $1.2 trillion external financing may be needed in the next five years
The rapid surge of AI is creating an unprecedented "debt black hole": according to Bank of America estimates, total capital expenditure for building AI data centers between 2025 and 2030 will reach as much as $5 trillion, with external financing needs of core cloud giants alone reaching $1.2 trillion to $1.5 trillion. Free cash flow is already running low for giants such as Amazon and Meta, while Nvidia and Broadcom have quietly taken on the role of "implicit guarantors"—marking the beginning of a capital gamble that is set to reshape global credit markets.
Analyst Makes Bold Prediction: Micron (MU.US) Expected to Surpass Microsoft (MSFT.US) in Fiscal Year 2027 Profit; Memory Prices Are the Key Factor
Is Micron (MU.US) expected to earn a net profit of $35 billion in a quarter, surpassing Microsoft's (MSFT.US) profits?
Warning Signs of US Stock Market Crash Reappear as in 2018 and 2022? Fed Tightening and US Treasury Supply Hit Amid Worsening Market Breadth, Liquidity Crisis May Be Approaching
Liquidity pressures may not yet be apparent on the surface of the market, but as market breadth in both stock and bond markets continues to deteriorate, these pressures are steadily accumulating internally.
X Finance Bull highlights $3,300 XRP price model filed with SEC
