Treasury Report and Currency Paradox
The US Treasury Department recently issued its major report on foreign exchange policies. Specifically, the publication warned international trading partners against manipulating their currencies for unfair trade advantages. Multiple major economies remain on the official monitoring list, including Japan, China, and Germany. However, the United States coordinated a massive joint currency intervention with Tokyo during the exact same month. Consequently, critics quickly highlighted the stark contradiction between Washington’s aggressive warnings and its direct market actions.
The Unorthodox Euro Intervention
Japanese Prime Minister Sanae Takaichi faced a rapidly depreciating yen shortly after taking office. To support Tokyo, US Treasury Secretary Scott Bessent executed a highly unorthodox intervention via the New York Federal Reserve. Instead of selling US dollars, the Treasury chose to sell euros without warning European allies. Consequently, this unexpected move blindsided the European Central Bank and triggered a four percent devaluation in the euro. Furthermore, Washington intervened to prevent Japan from selling its massive US Treasury holdings, which would have severely spiked American borrowing costs.
Market Realities and Reserve Credibility
Despite these coordinated efforts, the joint currency intervention ultimately failed to halt the broader market trend. Takaichi’s aggressive fiscal borrowing plans and low interest rates continue to weigh heavily on the yen. Meanwhile, US borrowing costs climbed to multi-decade highs during recent government bond auctions. Leading economic scholars warn that this unorthodox intervention sends a troubling signal to global financial markets. Specifically, these aggressive actions indicate that the US dollar may lose its appeal as the dominant global reserve currency.
Reference
Lo, A., & Lo, A. (2026b, agosto 21). As I see it | The US is telling its trading partners – do as I say, not as I do. South China Morning Post. https://www.scmp.com/opinion/world-opinion/article/3364765/us-telling-its-trading-partners-do-i-say-not-i-do?share=MALJCbO1IJn9goQKV7nIR2CyP%2B%2BOE7p64wS7dBzDQnPK9u4e7Vp94a2o6vuRiRatxfTu1beG1Qq5BphJSlB9ZMN4yUsRf2e4PJVQt57QJJQ%3D&utm_campaign=social_share