"The Sheriff Is in Town": U.S. Treasury Secretary Scott Bessent Brought Washington Back to the Currency Market

Scott Bessent, who once teamed up with George Soros to crash the British pound, has returned to currency trading—but this time as U.S. Secretary of the Treasury. In less than a year, he has intervened twice to support the currencies of other countries—Argentina and Japan. Moreover, the latter operation broke with Washington’s traditional course of action.

Since early May, the Japanese yen has been rapidly depreciating against the dollar—by the end of July, it had weakened by 4.6%, falling to its lowest level since 1986 (164 yen per dollar). In June, its inflation-adjusted exchange rate against a basket of currencies from its trading partners was the lowest since the early 1970s.

The Bank of Japan spent about 13.8 trillion yen ($87 billion) over two trading days in late July to prop up the national currency, according to the Financial Times. This broke its own previous record set in April and May, when it allocated 11.73 trillion yen ($74 billion) for the same purpose. All of this “underscores the authorities’ concern about the yen’s rapid depreciation,” Mizuho analyst Masayuki Nakajima told the newspaper.

But the most interesting aspect of this story was the U.S. intervention—or, more precisely, the way it was staged. On Friday, July 31, U.S. Treasury Secretary Scott Bessent allowed reporters to view and photograph the following entry in his notebook: “To-do list: buy $5–10 billion in Japanese yen (JPY).” A few days later, while confirming the first U.S. currency intervention in support of the yen since 1998, Bessent noted that he had shown the entry on purpose.

Over the next two days, the dollar weakened significantly against the Japanese yen, falling from nearly 164 to 155.23 yen. By August 7, it had strengthened to 158.4 yen.

Breaking with tradition, Washington informed its counterparts only after the operations had taken place, people familiar with the matter told the FT.

These operations utilized funds from the Ministry of Finance’s Exchange Rate Stabilization Fund (ESF). But then Bessent announced that the U.S. could continue to support the yen using a special repo facility, through which foreign central banks can borrow dollars from the Fed using U.S. Treasury bonds as collateral. The Fed has allocated $60 billion for such transactions, but Bessent said he would request an increase in that amount.

All of these measures “mark a return to an era of active trading in the foreign exchange market,” according to Chris Turner, ING’s global head of markets.

"As a former trader, Bessent probably feels at home outside the 'traditional scope of the Treasury Department's activities,'" adds Stephen Mayrow, managing partner at Beacon Policy Advisors.

The current U.S. Secretary of the Treasury did, in fact, work in the markets. In 1992, together with George Soros, he bet against the pound, forcing the Bank of England to unpeg the currency from other European currencies and devalue it. Then, in the 21st century, they made $1 billion by betting against the yen.

But why would he now need to use his past skills to support it? Bessent himself stated that the yen’s depreciation could trigger a race to devalue currencies across Asia, and that a stable Japanese currency is “important not only for the U.S., but for the entire Asian region.”

The yield on 10-year U.S. Treasury bonds is already nearly 4.7%—the highest since early 2025—and selling pressure could push it even higher. Meanwhile, for the second time under new Chair Kevin Warshe, the Fed has opted not to raise rates, even though inflation stood at 3.5% in June and as high as 4.2% in May.

The Bank of Japan is also keeping its interest rate at 1%, even though inflation in the country is accelerating: in February, before the war in the Middle East began, it stood at 1.3%, and by June it had already risen to 1.7%. More than 80% of Japan’s energy consumption is met through imports. Consequently, yields on Japanese government bonds are also rising, fueled in part by Prime Minister Sanae Takaichi’s large-scale investment plans.

“According to Bessent, U.S. bond yields are high precisely because Japanese bond yields are high,” the FT quotes Bridge Kuran, a portfolio manager at Wellington, as saying. “Therefore, if the yen is propped up, it will lead to lower yields in Japan and, consequently, in the U.S.”

“It was a rather clever move, reminiscent of the assistance Bessent provided to Argentina, which proved to be quite successful,” says Kenneth Rogoff, a professor at Harvard University and former chief economist of the IMF. In October 2025, the U.S. intervened in the peso market to support Argentine President Javier Milei, a Trump ally.

“But unless the U.S. Treasury is willing to hold massive reserves of yen—which would be a truly radical move—purchasing them is merely a temporary measure intended to buy the Bank of Japan a little time,” Rogoff adds.

“It’s incredibly amusing that a man who worked for Soros … and with whom they humiliated the Bank of England in 1992 is now pretending that it’s possible to carry out currency interventions on one’s own and thereby defend the exchange rate over the long term,” says Adam Posen, president of the Peterson Institute for International Economics and an expert on the Japanese economy, referring to Bessent.

The last time the U.S. supported the yen—in June 1998, during the Asian financial crisis—its exchange rate fell below the intervention level in less than a month. It began to rise steadily only when the U.S. Federal Reserve began actively cutting interest rates in September, thereby narrowing the gap with Japanese rates.

“For interventions to be effective [at this time], they must be accompanied by a faster rate hike by the Bank of Japan or the emergence of conditions conducive to the Fed easing its monetary policy,” says Mok Sion Xi, a strategist at Oversea-Chinese Banking Corp.

In the first half of the 1980s, the dollar appreciated by about 50% against the British pound, the German mark, the French franc, and the Japanese yen, as then-Federal Reserve Chairman Paul Volcker radically raised interest rates to put an end to the high inflation of the 1970s. In September 1985, these five countries signed an agreement at the Plaza Hotel in New York, and in the months that followed, they significantly weakened the dollar through currency interventions.

The euro was introduced into the non-cash market in 1999 at a rate of 1.17 euros per dollar, but by October 2000, the U.S. dollar had fallen to 0.82 euros. A month earlier, the central banks of the G7 countries had agreed to intervene in support of the euro, which helped reverse the trend. But here, too, the dynamics of monetary policy played a key role. The Fed began aggressively cutting rates to combat the fallout from the dot-com bubble, which burst between 2000 and 2002. As a result, the Fed’s rate fell from 6.5% to 1% in 2003, while the ECB’s rate fell only from 4.75% to 2%.

As an example, he cited the operation to prop up the Argentine peso ahead of the parliamentary elections, emphasizing that a victory for the party of Javier Milei, the “Argentine Trump,” would help strengthen right-wing parties throughout Latin America.

Developments in Argentina and Japan suggest that the U.S. Treasury Department is increasingly inclined to use currency interventions to achieve broader economic and geopolitical goals, according to Turner of ING: “This marks a significant departure from the relative passivity that has characterized U.S. currency policy for most of the past two decades.”

This article was AI-translated and verified by a human editor