U.S.-Japan Rare Joint Intervention Supports Yen, Goldman Sachs: Highlights Dollar's Irreplaceable Reserve Status

Recently, the United States and Japan launched a rare joint intervention to stabilize the yen exchange rate, sparking debate over the dollar’s appeal as a reserve currency. However, Goldman Sachs stated in a report released on Thursday (6th) that this incident actually highlights the U.S. dollar’s irreplaceable dominance in the international financial system. The deep market liquidity and scale allow central banks worldwide to swiftly deploy reserves during periods of market volatility.

The yen had weakened significantly, reaching a 40-year low. Prior to the U.S.-Japan coordinated intervention, the yen traded around 164 per dollar, but recovered to approximately 158 afterward. While some market participants worry that Washington’s active stance on the Treasury market might unsettle reserve managers, Goldman Sachs dismissed such concerns as "an overreaching inference."

Goldman Sachs analysts noted that the current administration’s stronger willingness to intervene compared to the past does not indicate new vulnerabilities in the U.S. Treasury market. Instead, it demonstrates the practical utility of dollar reserves during critical moments.

Goldman emphasized that the depth of U.S. capital markets enables central banks to steadily accumulate dollars during stable periods and smoothly withdraw them under stress. Additionally, U.S. Treasury Secretary Scott Bessent proposed raising the cap on the Federal Reserve’s "Foreign and International Monetary Authorities (FIMA) Repo Facility." This would allow central banks to temporarily obtain dollars by pledging Treasuries as collateral, rather than selling them outright, thereby reducing market disruption from sudden Treasury sales.

Although Goldman also acknowledged long-term risks to the dollar, such as U.S. institutional uncertainty, Japan’s experience reaffirms that competitors struggle to match the dollar’s advantages.

The report concludes: "When intervention becomes necessary, the vast majority of central banks still need the U.S. dollar."