Strategist: US Treasury Suspected of Intervening in Yen via Euro to Avoid USD Weakness

TechFlow reports, on August 3, strategists indicated that the U.S. Treasury may use euros instead of dollars to fund its yen purchase plan, to avoid domestic currency depreciation and prevent its strong dollar policy from being questioned.

Two informed sources revealed that the Federal Reserve Bank of New York requested at least two major U.S. banks last Friday to inquire about the JPY/EUR exchange rate. "The U.S. likely does not want to be seen by the outside world as selling off dollars."

David Forrest, Senior Strategist at Credit Agricole in Singapore, stated. He said: "The U.S. maintains a strong dollar policy; they do not want to be perceived as trying to gain a competitive advantage by weakening their own currency, because this practice would violate the G20 consensus on foreign exchange policy."

"If the U.S. Treasury sells off dollars, it does not look good image-wise, so they choose to use euros." Jason Wang, Currency Strategist at Bank of New Zealand in Wellington, stated. He pointed out: "The final effect is actually the same, because funds still need to be reallocated back to euros at some stage in the future, this may mean the U.S. will still end up selling dollars, it's just that this method is more opaque."