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US joins Japan yen rescue, raising risk of Treasuries unwind
Japan may have deployed about $96B over two days, and its Treasury holdings total roughly $1.14T, making any future large Treasury sales a potential driver for US yields.
The United States joined Japan in supporting the yen, after preliminary central bank data suggested Tokyo deployed nearly $96 billion over two days, according to CryptoSlate. The move is being watched by crypto traders because it could force unwinds of carry trades funded with cheaper Japanese capital.
On Aug. 3, Japan’s Ministry of Finance confirmed it coordinated with the US Treasury on July 31 to counter months of “excessive volatility and disorderly movements.” Reuters reported the Bank of Japan may have spent up to $58.97 billion during an initial intervention and another $36.58 billion during a coordinated operation with the United States.
The operation marked Washington’s first coordinated yen-buying intervention with Japan since 1998, and the Treasury’s first foreign exchange intervention since 2011. CryptoSlate said the yen rose off a 40-year low near 164 per dollar to 155.20 before giving back some gains, moving to about 157.8 as traders weighed whether further intervention would follow.
CryptoSlate also noted that while BTC traded down to as low as $62,382 over the prior 24 hours before touching $64,163, it later pared gains and was around $63,510 at press time, with no clear evidence of a broad liquidation of leveraged carry trades. The outlet tied the intervention to broader financial risks from Japan’s currency decline, saying Japan held about $1.14 trillion in US government securities at the end of May. It warned that if additional intervention requires large Treasury disposals, the resulting bond sales could pressure bond prices and push US yields higher, because the US would be selling more into an environment where it is already competing for borrowing.
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