In our Part 1 of this same story, which for the record, became so long it turned into a series, BUT with things moving so fast we pushed this to print before something else hit the streets (Baby Twist) of Capital Markets…
Spoiler Alert: Given the complexity of this (and Baby Twist) situation we will cut to the chase…
The reason for this move is to keep US Interest Rates in check/Down and promote a WEAKER US Dollar!
While this does not look too terrible, looking closer, these rates, (2.10.30 year US Treasuries) are pushing against multi decade highs!
A little overlap …. but to get you back into the topic, Bessent pushed on the JPY/Japanese yen to help give it strength, AND pressure the US dollar lower ….
This is a USD/JPY – Dollar to Yen chart – when going down the Yen is losing value.
Pro-Note- Currencies are one of the least volatile assets under normal circumstances. ie The JPY is going from 164 to mid 155’s
So why does Bessent and company care about the JPY? A cause and affect of possible higher US Rates, as mentioned in the spoiler alert.
Your next question may be why was the JPY losing value ?
There are various reasons, but the main is their interest rates after long being stuck at basically zero are moving up!
With this move in rates, there is less need for Japanese currency to be the worlds cheap borrowing rate, aka the Yen carry trade thereby causing currency movement across the world!
Japan is one of the largest holders of US Treasuries, if they start selling or even buying less, US interest rate pressure may occur!
FIMA use– Bessent used this resource rather than other treasuries once again to keep any US Treasury sales pressure off/inadvertent higher US Rates.
One problem that arose during all of this – WTI/Crude also putting pressure on interest rates/Bessent’s efforts.
Wow… So that was a mouth/eye full… Sorry for the complexity. Bessent doubling down with this technique and Baby Twist shows his goal of keeping US Treasury Rates under control….
Also keeping/trying for a weaker US Dollar, possibly making international investments all the more appealing.
John A. Kvale CFA, CFP
AI Content Authenticity: AI created the FIMA chart and yen holdings. All of the following text content has been completed by myself and has not been edited or created by AI. Occasionally we do use AI for images and will note when appropriate.
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
