The Japanese yen extended its decline by roughly 1% against the U.S. dollar on Wednesday after Treasury Secretary Scott Bessent explicitly ruled out U.S. intervention in the currency pair.
In an interview on CNBC, Bessent said the United States is "absolutely not" stepping in to affect the dollar-yen exchange rate. He reiterated the administration's adherence to a longstanding policy favoring a strong dollar and sought to clarify the government's posture on market intervention. "We don’t comment on intervention speculation," he said, adding that the approach to a strong dollar "means setting right fundamentals."
Bessent argued that sound economic policies would naturally draw capital into the United States, stating, "If we have sound policies the money will flow into US." His comments came as emerging-market currencies also moved to session lows in the wake of the Treasury Secretary's remarks.
The exchange-rate moves follow a period of relative dollar softness. Last Tuesday, the greenback posted its worst single-day performance since April 2025, sliding by about 1.3%. President Donald Trump had previously voiced approval of the weaker dollar during a visit to Iowa, describing it as "great."
On trade and growth, Bessent pointed to a narrowing U.S. trade deficit and said it "should help the dollar." He also credited the administration with putting in place "good policies for growth" that he said have supported recent gains in the stock market, though he warned that past stock performance is not a reliable predictor of outcomes for 2026.
On monetary policy, Bessent was careful to leave decisions to the Federal Reserve, saying today's interest rate decision is "up to the Fed." He also disclosed that he had discussed the Fed Chair post with President Trump during their return flight from Iowa, but he emphasized that no decisions have been finalized.
The immediate market reaction included a notable fall in the yen, the emergence of session lows among several emerging-market currencies, and continued attention to comments linking trade balances, fiscal policy and capital flows to currency moves. Market participants will also be watching for any further signals from Treasury officials and the Fed as they consider the course of monetary policy and exchange-rate developments.
Key points
- The yen fell about 1% against the U.S. dollar after Treasury Secretary Scott Bessent said the U.S. is "absolutely not" intervening in the dollar-yen rate.
- Bessent reaffirmed a traditional strong-dollar stance, stating that a strong dollar policy "means setting right fundamentals" and that sound policies will draw capital into the United States.
- Emerging-market currencies hit session lows following the remarks; Bessent also cited a shrinking U.S. trade deficit as a factor that "should help the dollar" and linked administration policies to recent stock market performance.
Risks and uncertainties
- Market sensitivity to official statements on intervention - currency markets reacted sharply to Bessent's comments, creating potential volatility for FX traders and emerging-market assets.
- Monetary policy uncertainty - Bessent said interest rate decisions are "up to the Fed," leaving scope for market uncertainty until the Fed's actions are clear, which can affect equities and fixed-income sectors.
- Dependence on policy outcomes - while Bessent linked trade-balances and growth policies to dollar direction, his caution that past stock performance does not guarantee future results highlights uncertainty for investors in equities and related financial markets.