Analysis: Federal Reserve may be pulled into Bessent’s effort to support Japan’s yen

📰 source: cnbc_topnews · 💼 business

treasury secretary scott bessent wants the federal reserve to expand a lending facility that would let japan support its yen without selling off its u.s. treasury holdings. the request comes as new fed chair kevin warsh looks to rework the fed-treasury relationship.

the u.s. joined japanese authorities last week to prop up the yen after it hit nearly 164 per dollar, the weakest since 1986, according to factset. bessent said the coordinated effort countered disorderly yen movements. the treasury sold euros from its exchange stabilization fund to fund yen purchases, per the financial times. the yen then bounced 3.5% to just under 157.

bessent wants japan to use the fima repo facility, which lets foreign central banks lend their treasurys short-term rather than sell them. expanding fima would need an fomc vote. economist torsten slok of apollo says the yen carry trade has broken down. the 10-year treasury yield rose above 4.7% before the intervention, then dipped slightly.

why it matters: fed expanding fima facility could ease treasury market strain but risks political entanglement, reshaping fed-treasury ties.

source: cnbc_topnews
sentiment: +0.10 · impact: 0.75