JPMorgan says US Treasury has limited yen intervention capacity, with theoretical firepower up to $187 billion

JPMorgan strategists said the US Treasury’s readily available resources for foreign-exchange intervention are limited, but the pool could expand sharply under less conventional funding arrangements. In an Aug. 3 note, the bank said the Treasury’s Exchange Stabilization Fund held roughly €13 billion in euro-denominated assets and $25.5 billion in dollar assets as of June. That amount looks modest next to Japan’s intervention size of about $35 billion to $60 billion between 2022 and 2026. The report laid out two ways to increase intervention capacity: converting the Treasury’s IMF Special Drawing Rights into dollars, and swapping foreign-currency assets into dollars. Under that framework, JPMorgan said the Treasury could theoretically mobilize as much as $187 billion. If the Federal Reserve were involved, the scale of intervention could be "effectively doubled," implying a potential US-Japan pool of $374 billion. The strategists also warned that intervention capacity is not unlimited because the Exchange Stabilization Fund is finite and fresh funding may require congressional appropriations. The report came after the US Treasury, through the Federal Reserve Bank of New York and via Goldman Sachs and JPMorgan, bought yen last Friday in what it described as the first coordinated intervention with Tokyo in more than a decade.