Did Trump Betray Europe? US Sells Euros to Boost Yen, ECB Learns After the Fact and Calls It Hurtful!

After the yen recently plunged to a 40-year low, the US Treasury and Japan's Ministry of Finance jointly intervened in foreign exchange markets last week to halt the yen's depreciation. However, the UK's Financial Times reported on August 7 that insiders revealed the US had used the sale of euros to buy yen in this intervention, an action taken without prior notification to the European Central Bank (ECB). Senior European officials called the move a shocking and sad breach of long-standing cooperation norms among Western monetary authorities.

The yen has been steadily weakening, hitting a 40-year low last week, prompting the US and Japan to jointly intervene in currency markets for the first time since 2011. US Treasury Secretary Scott Bessent emphasized, "The United States will do whatever it takes to help Japan stabilize the yen's exchange rate."

The US has previously intervened to support the yen. In 1998, amid the Asian financial crisis, the US helped strengthen the yen. Later, in 2011, after Japan's devastating earthquake, the US intervened again—but that time to weaken the yen, which had surged too high. This time, the goal is to support the yen, marking a reversal in policy.

Analysts suggest the US wants a stronger yen because if Japan were to sell its holdings of US Treasury bonds to support the yen, it could further drive up US bond yields and interest rates. Thus, by intervening directly, the US is also protecting its own bond market.

US sold euros—Europe found out afterward

The Financial Times reported on August 7 that, according to several sources, the ECB only learned of the US sale of euros and purchase of yen after trading concluded on Friday. One source said ECB President Christine Lagarde and US Treasury Secretary Scott Bessent discussed the intervention by phone on Saturday.

Typically, such interventions are expected to involve the use of the US dollar. Insiders noted that some senior ECB officials viewed the US decision to use euros as an unprecedented violation of long-standing cooperation practices among Western monetary authorities.

Since World War II, Western central banks and finance ministries have emphasized trust and consultation, especially in coordinated currency interventions. A European policy insider told the FT that the US Treasury's sale of euros—conducted via the Federal Reserve Bank of New York—was "very striking and sad."

The joint intervention by the US and Japan caused the yen to surge. Earlier this month, the yen had fallen to nearly 164 per dollar, its weakest level since 1986. It has since recovered to around 158 per dollar.