Fresh data on the Federal Reserve¡¯s various accounts hints at two potential ways Japanese policymakers may have funded currency interventions this past week to bolster the yen.
One source may have been a Fed facility where central banks stash overnight cash to earn a market rate. The amount held in this pool ¡ª the Fed¡¯s foreign reverse repurchase agreement, or RRP, facility ¡ª as of May 1 was down about $8 billion from a week earlier, to $360 billion, figures from the central bank show. It was the first drop since the week through April 10. Meanwhile, a separate cash account used by central banks tumbled about $17.8 billion.
¡°Historically, the Japanese authorities have not stockpiled their intervention resources in the Fed¡¯s non-interest-bearing foreign official deposits category,¡± Wrightson ICAP economist Lou Crandall wrote in a note to clients. ¡°The interest-bearing foreign RRP facility offers more than enough liquidity to support FX operations,¡± however, the week¡¯s data ¡°suggests that this was an exception¡± to their usual practice.
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