WASHINGTON – Currency market intervention by the Federal Reserve Bank of New York on behalf of Japanese monetary authorities is “not unusual,” a senior U.S. Treasury Department official said Wednesday.
“The use of the New York Fed is not unusual,” Treasury Undersecretary for International Affairs John Taylor told reporters after congressional testimony.
The Federal Reserve Bank of New York stepped into the market Tuesday to buy dollars on behalf of the Bank of Japan, the first time in 15 months Japanese monetary authorities have asked a foreign central bank to intervene in the currency market.
In the New York market Tuesday, the dollar temporarily dropped to a new 33-month low of 110.07 yen. Japan is worried that a strong yen will hurt exports and the fledging economic recovery.
U.S. manufacturers have been criticizing Japan’s repeated currency market interventions as moves to weaken the yen artificially.
Japan used 4.46 trillion yen from Aug. 28 to Sept. 26 to intervene in the currency market, bringing the total funds used for such operations from the beginning of the year to 13.48 trillion yen, according to data released Tuesday by the Finance Ministry.
At the hearing held by a subcommittee of the House of Representatives Financial Services Committee, legislators stressed the need for the U.S. administration to urge Japan to stop repeated currency intervention.
Taylor, however, avoided making any comment on the advisability of the Japanese intervention. He only said the recent statement issued by the Group of Seven countries “still speaks for itself” on the foreign-exchange market.
The statement, adopted in Dubai on Sept. 20, said: “We reaffirm that exchange rates should reflect economic fundamentals. We continue to monitor exchange markets closely and cooperate as appropriate.
“In this context, we emphasize that more flexibility in exchange rates is desirable for major countries or economic areas to promote smooth and widespread adjustments in the international financial system, based on market mechanism,” the statement said.
Asked at the congressional hearing about the dollar’s recent decline, Taylor said there is no change in the U.S. policy of favoring a strong dollar.
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