The European Central Bank was not told in advance that the US Treasury, acting through the New York Federal Reserve, had sold euros to buy yen last week, with Frankfurt informed only after the trade had already been executed, according to people familiar with the matter.
ECB president Christine Lagarde and US Treasury secretary Scott Bessent spoke about the intervention the following day, one of those people said. The sequence marks a departure from the pattern of consultation that has typically preceded joint currency interventions among major western monetary authorities since the second world war, when such moves have generally been coordinated in advance. Some senior ECB officials are understood to regard the use of euros, rather than dollars, in the trade as an unprecedented break from that convention.
A Treasury spokesperson said the department does not coordinate decisions on the allocation of reserves within its Exchange Stabilization Fund with foreign authorities, adding that such allocation decisions rest with the Treasury, informed by assessments from the Treasury and the Federal Reserve of market liquidity and valuations. The spokesperson confirmed the Treasury had reallocated reserve assets within the ESF over the course of the week. A senior Trump administration official separately said the department respects the confidentiality of private discussions with international counterparts.
The euro sale formed part of a broader, joint US-Japan effort to support the yen — the first such coordinated action in almost 30 years — after the currency fell to around ¥164 against the dollar, its weakest level since 1986. Dollar sales were reportedly avoided given the potential for such a move to be read as working against Bessent's strong-dollar policy. The interventions pushed the yen back to around ¥157, though it has since eased to ¥158.
Analysts, drawing on provisional Bank of Japan data, estimated that Japan alone committed approximately ¥13.8tn ($87bn) over two days — more than in its previous record intervention campaign of ¥11.73tn across April and May. Mizuho analyst Masayuki Nakajima said the scale of spending in such a short window underscored the level of concern among authorities over the pace of the yen's decline.
The Bank of Japan held interest rates steady at its meeting in July. Governor Kazuo Ueda said the central bank saw a greater need than before to pay attention to upside risks to inflation. Traders were pricing in a 44 per cent probability of a rate increase at the BoJ's next meeting in September.
The currency moves have coincided with a rise in long-dated US Treasury yields, with long-term American borrowing costs running near 19-year highs, even as US inflation eased in June while remaining above the Federal Reserve's 2 per cent target.
The gap between the ESF's reallocation of reserves and the ECB's later notification leaves open how such reserve decisions are communicated to counterpart authorities in future joint interventions, while the 44 per cent probability traders assign to a September BoJ rate move, set against long-term US borrowing costs near 19-year highs, keeps the near-term rate and yield outlook on both sides of the intervention unresolved.
