Secret currency operation: how Washington supported the yen by selling euros without coordination with the ECB
Last week was marked by an unprecedented move by the U.S. Department of the Treasury. Instead of the traditional sale of dollars to support the weakening Japanese yen, the U.S. Treasury conducted an operation using the euro. Moreover, the European Central Bank (ECB) was informed only after the deal was completed, which constitutes a gross violation of established coordination norms.
According to my information, the Federal Reserve Bank of New York, acting on behalf of the Treasury, fully carried out the task of selling the European currency. Only the next day did ECB President Christine Lagarde and U.S. Treasury Secretary Scott Bessent discuss the already accomplished fact. This approach demonstrates a radical departure from decades of coordinated actions by Western central banks, which, since World War II, had always planned currency interventions jointly.
Why Washington chose the euro instead of the dollar
The choice of the euro as the intervention instrument is not a technical detail but a deliberate political signal. Selling dollars would directly contradict the Donald Trump administration's narrative of a "strong dollar," which Bessent actively promotes. Using euro reserves instead allowed pressure to be applied to the Japanese currency without undermining the position of the American one.
The market has already reacted: the USD/JPY pair collapsed from levels around ¥164 to ¥158 per dollar, subsequently stabilizing around 158.40 by August 7. Japanese stock indices, meanwhile, held firm, showing only a slight decline, which indicates the targeted nature of the intervention.
Europe's reaction and new risks
At the ECB, the incident was described as a violation of decades of coordination, with one participant in the talks emphasizing the unprecedented nature of the step. A U.S. Treasury representative, in turn, parried the criticism, stating that decisions on the allocation of funds from the Exchange Stabilization Fund are made based on an assessment of liquidity and asset value, and reminded of the confidentiality of negotiations.
Economists link this tactic to concerns that Japan might begin selling off U.S. government bonds in response. Currently, traders estimate the probability of a Bank of Japan rate hike in September at 44%, and central bank chief Kazuo Ueda warns of growing inflationary risks. European officials are now wondering whether this intervention will be a one-off action or a new strategy for Washington.
My comment: This episode is a vivid illustration of how the Trump administration is willing to act unilaterally, even at the risk of damaging relations with key allies. For the crypto market, this is a signal of rising volatility in fiat currencies, which potentially enhances the appeal of decentralized assets as a hedge. However, investors should remember: such actions could provoke retaliatory measures from the ECB and lead to unpredictable movements across all markets.