JPMorgan strategists said the US Treasury’s foreign-exchange intervention capacity is smaller than many may assume, though the amount could rise sharply if officials use less conventional funding arrangements. In an Aug. 3 report, Tanase Junya and others said the Treasury could theoretically mobilize as much as $187 billion.
The bank said the Treasury’s immediate "firepower" is limited, but the funding base can be expanded if authorities alter how resources are scheduled and deployed.
What sits inside the Exchange Stabilization Fund
According to JPMorgan, the Treasury’s Exchange Stabilization Fund held about €13 billion in euro-denominated assets and $25.5 billion in dollar assets as of June this year.
The report compared that with Japan’s intervention scale of roughly $35 billion to $60 billion between 2022 and 2026, arguing that the Treasury’s currently available resources look relatively small on that basis.
Report follows coordinated action with Tokyo
As background, the report said the US Treasury bought yen last Friday through the Federal Reserve Bank of New York, using Goldman Sachs and JPMorgan as counterparties. It described the move as the first coordinated foreign-exchange intervention with Tokyo in more than a decade.
US Treasury Secretary Bessent said in a public statement that the intervention "addressed disorderly volatility in the yen" and added that the Treasury would "not hesitate to participate in further coordinated intervention."
Two unconventional routes to expand capacity
JPMorgan outlined two ways the Treasury could enlarge its intervention capacity:
- convert its International Monetary Fund Special Drawing Rights, or SDRs, into dollars;
- swap its foreign-currency assets into dollars.
Under that setup, the Treasury could theoretically access about $187 billion.
The bank added that if the Federal Reserve takes part, the size of any intervention could be "effectively doubled." That would put the potential US-Japan funding pool at $374 billion, far above Japan’s realized intervention total over the past four years.
JPMorgan says intervention is not unlimited
The strategists also cautioned that the Exchange Stabilization Fund is not unlimited. "We do not believe the Treasury can intervene with infinite capacity," the report said, adding that the fund is finite and that new money may require congressional appropriations.
That points to a practical limit: while the US may have room in theory to expand intervention, actual operations are still constrained by the existing budget framework. If the yen keeps weakening in the coming months, the Treasury may need to lean more aggressively on SDRs or foreign-currency reserves rather than wait for a formal appropriation process in Congress.
Market reaction
On Aug. 3, USD/JPY extended its intraday drop to 100 points and briefly traded at 156.65, reflecting the market’s sensitivity to intervention signals.
Kyodo News reported on Saturday, citing people familiar with the matter, that the US and Japan may announce measures early next week to address yen weakness as a warning against speculative bets.