Strategist: US Treasury Suspected to Intervene in Euro to Yen to Prevent Dollar Weakness

BlockBeats News, August 3rd - Strategists have indicated that the U.S. Treasury Department may fund its yen-buying program using euros instead of dollars to avoid currency depreciation and to prevent scrutiny of its strong dollar policy. Two sources familiar with the matter revealed that the Federal Reserve Bank of New York last Friday asked at least two major U.S. banks to inquire about the yen-to-euro exchange rate.

“The U.S. most likely does not want to be seen as selling the dollar to the market,” said David Forester, Senior Strategist at Nomura Credit Suisse in Singapore. “The U.S. is maintaining a strong dollar policy, and they do not want to be seen as trying to gain a competitive advantage by weakening their currency, as this would go against the G20 consensus on exchange rate policy.”

“If the U.S. Treasury were to sell the dollar, it would not look good in terms of optics, hence the choice to use euros,” said Jason Wang, Currency Strategist at the Bank of New Zealand in Wellington. He pointed out, “The ultimate effect is the same because the funds will eventually need to be reallocated back to euros at some point in the future, which could mean that the U.S. will still end up selling dollars, just in a more opaque manner.”