Market Hunts for Signs of Japan Yen Intervention in Fed Accounts
Fresh data on the Federal Reserve’s various accounts hints at two potential ways Japanese policy makers may have funded currency interventions this past week to bolster the beleaguered yen.
One source may have been a Fed facility where central banks stash overnight cash to earn a market rate. The amount held in this pool — the Fed’s foreign reverse repurchase agreement facility — as of May 1 was down about $8 billion from a week earlier, to $360 billion, figures from the central bank show. It was the first drop since the week through April 10.Meanwhile, a separate cash account used by central banks tumbled about $17.8 billion.
The figures cover a week that included two instances where Japanese policymakers likely entered foreign-exchange markets to support the yen, which is the weakest Group-of-10 currency this year versus a broadly strengthening dollar. The Ministry of Finance has refrained from confirming interventions, but a Bloomberg analysis ofBank of Japan accounts suggest they took place. Policymakers likely spent some ¥9 trillion this week, the analysis shows, or nearly $60 billion at current exchange rates, to bolster the currency — an amount on par with interventions that took place in 2022.
On Monday, a holiday in Japan, the yen fell to a fresh 34-year low of 160.17 per dollar before sharply rebounding(see cap #1 the first big drop and it looks like they did yesterday as well)in thin trading. On Wednesday following the conclusion of the Fed’s two-day policy meeting, the yen abruptly rallied more than 3% in the waning hours of the US trading day. Japan’s foreign currency reserves were worth about $1.15 trillion at the end of March, climbing by $4.6 billion from the previous month, according to the latest data from the country’s Ministry of Finance. About $155 billion was parked with the Bank for International Settlements and other foreign central banks, down slightly from $155.7 billion at the end of February.
Before Japan intervened to defend the yen in October 2022, central banks had been boosting the amount of cash they parked at the foreign RRP to what was then a record $333 billion. Balances then declined by the most in five months later that month. However, Japanese officials didn’t tap that Fed facility in a previous round of currency intervention in 2022, and most of the cash has been untouched for a decade, Citigroup Inc. strategists wrote in a note last month. As a result, they expected some sales of front-end Treasury bills or coupons if an intervention occurred.
https://www.bnnbloomberg.ca/market-hunts-for-signs-of-japan-yen-intervention-in-fed-accounts-1.2068325
https://tradingeconomics.com/japan/currency
From Monday >>20799263 pb