For the first time in decades, the U.S. and Japan have joined forces to intervene in the foreign exchange market to prop up the yen; analysts say the U.S.'s primary motive is to prevent Japan from selling off U.S. Treasuries.
For the first time in decades, the United States and Japan have jointly intervened in the foreign exchange market to support the Japanese Yen, after it had fallen to a near four-decade low of 163.73 against the US Dollar, before quickly rebounding to 157.57 following the intervention. Analysts point out that the core motivation for the US's rare participation in this coordinated intervention is to prevent Japan from being forced to massively sell its holdings of US Treasury bonds, which constitute its largest overseas asset, in order to raise intervention funds, as such a move could impact long-term US Treasury yields. The high-profile emphasis by both countries' treasury departments on the availability of the Federal Reserve's FIMA repo facility is interpreted as an important signal to avert the worst-case scenario of "forced selling of US Treasury bonds."
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