US Treasury informed banks that it may intervene in Japan's yen, source says

News of the potential intervention by the U.S. Treasury pushed the yen higher against the dollar. It last traded at 159.61 to the dollar, up 0.06% on the day.

On Thursday, U.S. Treasury Secretary Scott Bessent told Fox Business Network that the yen "seems very undervalued to me" and that Japanese Prime Minister Sanae Takaichi was enacting "strong policies" that would help Japan's economic fundamentals.

Bessent added that "we think excess volatility in the yen isn't healthy" and that the yen has "substantially overshot what would be called an equilibrium price."

The last time that the U.S. Treasury intervened to prop up Japan's yen was in 2011 as part of a coordinated action by G7 countries to stabilize the currency after a devastating earthquake and tsunami rocked Japan.

The Treasury last fall intervened to prop up Argentina's peso market ahead of parliamentary elections and provided President Javier Milei's government with a $20 billion currency swap line to help stabilize the currency and Argentina's dollar bonds.

The U.S. Treasury has informed a number of banks that it may intervene in the Japanese yen market on Friday and that they should "stand ready for future action," a source familiar with the matter told Reuters.

The notice to banks, channeled through the Federal Reserve Bank of New York, comes a day after Japanese authorities stepped in to prop up the yen, setting the currency up for its biggest weekly rise since February, pulling it off of four-decade lows against the dollar.