US Treasury Secretary Janet Yellen said any intervention by Japan to prop up the yen would be understandable if it were aimed at smoothing out volatility — not at affecting the level of the exchange rate.
(Bloomberg) — US Treasury Secretary Janet Yellen said any intervention by Japan to prop up the yen would be understandable if it were aimed at smoothing out volatility — not at affecting the level of the exchange rate.
“It would depend very much on the details,” Yellen said Tuesday when asked whether the Treasury Department would be understanding if Japan intervened to buy yen in the foreign-exchange market. “We usually communicate with them about these interventions.”
Japanese officials have expressed increasing concern about the weakness in the yen in recent weeks, a move that threatens to hurt domestic purchasing power. The yen has been hovering around a 10-month low against the dollar.
Earlier this month, Japan issued its strongest warning in weeks over sharp currency moves, raising the odds of government intervention if the slump continues.
Yellen made the comments to reporters on the sidelines of the United Nations General Assembly in New York.
The Japanese government intervened to prop up the yen last year for the first time since 1998 after the currency tumbled around 20% against the dollar and hedge funds kept adding to short bets on the yen. Group of Seven nations have long agreed as a basic principle to let markets set exchange rates.
Yellen also said that while there could be spillovers to the US economy from China’s slowdown, that’s not what she expects.
Disappointing data from China have suggested the world’s No. 2 economy may not reach an official target of 5% growth this year. While Beijing has already taken a number of measures to loosen strictures on the property market, it has stopped short of broad stimulus packages for consumer or sweeping interest-rate cuts.
“The Chinese would most likely use the policy space they have to try to avoid a slowdown of major proportions,” Yellen said.
–With assistance from Viktoria Dendrinou.
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