Strategists say the US used euros instead of dollars when buying Japanese yen
Source: Global Markets Bulletin
Strategists say the US Treasury may be using euros instead of US dollars to buy Japanese yen, in order to avoid depreciating its own currency and to prevent its strong dollar policy from being questioned.
According to two sources familiar with the matter, at least two major US banks received euro/yen pricing inquiries from the New York Federal Reserve last Friday. According to media reports last week citing sources, the New York Fed, on behalf of the US Treasury, sold euros and bought yen.
“The US may not want to be seen as selling dollars,” said David Forrester, Senior Strategist at Crédit Agricole Bank in Singapore. “They maintain a strong dollar policy and don't want to be perceived as trying to gain a competitive advantage by depreciating their own currency, as this would violate the G20's foreign exchange agreement.”
Since Japan began a new round of interventions on July 30, the euro has weakened against most G10 currencies and has fallen about 4% against the yen. The Bloomberg euro index fell 0.2% on Monday, but remains near its highest level since June 17.
Junya Tanase and Patrick Locke, strategists at JPMorgan, wrote in a report to clients, “The main goal of this intervention appears to be supporting Japan's request to prevent excessive depreciation of the yen rather than weakening the US dollar.”
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