"US Sold Euros and Only Notified ECB After the Fact to Defend Yen, Breaking Tradition"

Foreign media reported that when the United States joined Japan in defending the yen by selling euros, it did so without prior notice to the European Central Bank (ECB), notifying them only afterward and leaving the ECB baffled.

Complaints have emerged from within the ECB that a long-standing tradition of prior consultation among Western central banks, maintained since the end of World War II, has been broken.

According to the UK daily Financial Times on the 6th local time, multiple sources reported that the ECB was informed that the United States had sold euros and bought yen on July 31 only after the transactions were already completed.

According to one source, ECB President Christine Lagarde and U.S. Treasury Secretary Scott Bessent spoke about the U.S. foreign exchange market intervention only on Saturday, August 1.

Typically, it would have been expected that the United States would use dollars rather than euros if it undertook such market intervention, but contrary to expectations, the U.S. side sold euros.

It is known that the U.S. decision to sell euros rather than dollars stemmed from concerns that selling dollars would be interpreted as a measure to induce a weaker dollar, potentially undermining the Trump administration's strong-dollar policy.

Economists and analysts believe that another motive behind the U.S. participation in Japan's foreign exchange market intervention was to prevent Japan from selling U.S. Treasury bonds at a time when long-term U.S. Treasury yields are at their highest level in 19 years.

Inside the ECB, the U.S. decision to use euros in this transaction is viewed as an unprecedented breach of the long-held tradition of cooperation among Western monetary authorities, and strong voices of discontent are being raised.

A source familiar with the discussions among European policymakers told the FT that the U.S. euro sale, executed by the Federal Reserve Bank of New York on behalf of the U.S. Treasury, was "very shocking" and "regrettable."

This source pointed out that "nothing like this has ever happened before" and warned that decades of close cooperation among Western central banks, which has contributed to financial stability and economic growth, could be threatened.

Regarding this measure, the U.S. Treasury stated that it was not a matter to be coordinated with foreign policy authorities.

A Treasury spokesperson told the FT that the U.S. Treasury does not coordinate with foreign authorities when deciding the allocation of reserve assets within the Exchange Stabilization Fund (ESF) used for foreign exchange market interventions, adding, "Those decisions are made by the Treasury, taking into account the Treasury's and the Federal Reserve's judgments on market liquidity, asset valuation, and other relevant factors."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.