Recent U.S. Treasury interventions to prop up the Japanese yen and to lower longer-term U.S. borrowing costs were particularly concerning as they foreshadowed more intervention and breaks with norms, the officials, who asked not to be named, said.
After the August 1 yen transaction, U.S. Treasury Secretary Scott Bessent confirmed that the Treasury had sold euros for the Japanese currency and said he reassured central banks in the region that the move was "just a reallocation of resources." On Friday, he said that the foreign exchange assets to buy yen came from the Treasury's Exchange Stabilization Fund.
But European officials were especially annoyed the U.S. did not give them a customary heads-up that euro sales were part of the transaction, the sources said.
"That was infuriating," one of them said. "You always pick up the phone and give heads-up."
"The message to me is that the U.S. does whatever it wants."
Others were more forgiving and said the transaction was so unusual that it may have been an honest oversight.
Spokespeople for the European Central Bank and the Federal Reserve declined to comment.
A U.S. official said the U.S.-Japan intervention was undertaken to counter disorderly movements in the yen and to support stability in global financial markets.
"It was not directed at anyone else," the official said. "Treasury maintains close and ongoing communication with our international counterparts, but we do not comment on the operational details of those discussions."
The sources also said that Bessent’s plan to increase buybacks of longer-dated bonds -- transactions that may need to be financed by issuance of more shorter-term maturities -- was also a concern to European central bankers because, like the yen purchase, it indicates the administration was willing to take unusual measures to cap borrowing costs.
"These interventions normally offer just temporary relief," a second source said. "But they are clearly worried. So what is next? Will they put pressure on the Fed to start buying bonds on the market?"
While the Fed is the sole U.S. monetary policymaking body, independent in that mission by design from the elected administration, the sources said Trump has shown he is willing to go to extraordinary lengths to get his will across.
Their concern was that this could then set off upheaval in markets that would go far beyond the U.S.
The U.S. official responded by repeating earlier statements that the increased long-end bond buybacks were aimed at providing greater liquidity in longer-dated sectors where Treasury gets high-quality buyback offers.
"They are not monetary policy or an effort to impose a cap on interest rates," the official said.
On Thursday, however, a U.S. Treasury official had told reporters the Treasury was "really focused on bringing those long-end yields lower" because they had risen above what the department viewed as "fair value."
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