US Sale of Euros Boosts Yen, Catches ECB Off Guard
Last week, the US sold euros to boost the yen, a currency intervention that caught the European Central Bank (ECB) off guard.
Washington informed the ECB only after the action was implemented. In this joint US-Japan intervention, the US chose to sell euros instead of dollars to buy yen, which is an unconventional operation aimed at avoiding pressure on the US bond market.
This is a major unconventional currency intervention event among central banks, with funds flowing to support the yen. The yen benefited from a short-term boost, while the euro and the ECB's communication mechanism were pressured by the post-notification arrangement.
Source: Public Information
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During the US-Japan joint intervention for a weak yen, the US used euros as the intervention currency instead of the traditional dollar, indicating a priority consideration for the stability of US debt. The ECB was not adequately coordinated in advance, highlighting the current loosening of G7 currency coordination.
In terms of capital flow, the intervention was executed through the New York Fed, involving a reallocation of euro assets. The motive was to support allied currencies while minimizing spillover effects on the US domestic financial market.
Similar to historically limited coordinated currency actions, the current phase is characterized by a "bilateral over multilateral" intervention model.
Essentially, this represents a regulatory change: currency interventions are shifting from broad G7 consensus to selective bilateral execution, incorporating timing of communication and currency choice into strategic considerations.
ABAB News · Cognitive Laws
The true signal of intervention often lies in which currency is used.
Post-notification itself is a form of coordinated attitude.
Protecting the domestic bond market can sometimes take precedence over allied currencies.