The US and Japan just pulled off something the currency world hasn’t seen in nearly three decades. A coordinated foreign exchange intervention to prop up the yen, confirmed on August 3, is now sending ripple effects across the Pacific, putting upward pressure on China’s renminbi at a moment when Beijing is still figuring out how much appreciation it actually wants.
The joint operation, executed on July 30-31, involved buying yen in a move that pushed the currency from around 164 per dollar to approximately 155. That’s a roughly 5% swing in a matter of days. The last time Washington and Tokyo teamed up like this on forex markets was 1998, during the Asian financial crisis.
What happened and why it matters for the yuan
The mechanics of the intervention were somewhat unusual. Rather than selling dollars directly, the US Treasury acted through the Federal Reserve Bank of New York using euro-yen transactions.
US President Donald Trump framed the intervention as a gesture of friendship toward Japan. Japan’s Finance Minister Katayama struck a more tactical tone, signaling readiness for further action if the yen came under pressure again.
As of August 12, the USD/CNY exchange rate sat at approximately 6.748, reflecting a modest 0.54% gain for the yuan over the preceding month. The yuan has appreciated over 6% against the dollar over the past 12 months.
The People’s Bank of China sets a daily fixing rate and allows the yuan to trade within a band around it.
The appreciation dilemma
On one hand, appreciation boosts the purchasing power of Chinese firms buying commodities, equipment, and technology from abroad. On the other hand, too much appreciation erodes the competitiveness of Chinese exports. Manufacturers operating on thin margins, particularly in sectors like electronics, textiles, and solar panels, feel the pinch when the yuan climbs.
Eurizon, the European asset manager, has forecast that the yuan could appreciate by up to 9% over the course of 2026.
A shifting currency landscape
The coordinated nature of the move is what makes it significant. Unilateral interventions by Japan are relatively common. Tokyo spent tens of billions of dollars defending the yen in 2022 and 2024. But getting the US to participate signals a level of strategic alignment that markets read as more credible and more durable than solo efforts.
The yen did give back some of its gains after the initial surge. Minister Katayama’s comments suggest readiness to intervene again.