Scott Bessent blasts Warren over yen query, offers FX lesson
Treasury Secretary Scott Bessent on Friday attacked Sen. Elizabeth Warren over her Aug. 13 letter questioning a rare U.S. purchase of Japanese yen, calling her opening paragraph wrong about the transaction and sarcastically offering a "Foreign Exchange for Dummies" tutorial. The clash matters because Bessent defended the intervention as protecting U.S. borrowing costs while leaving key details undisclosed.
The exchange escalated a fight over one of Washington's most unusual currency moves in decades. Bessent posted his Aug. 27 response on X after Warren, the Senate Banking Committee's top Democrat, pressed for details on Treasury's use of the Exchange Stabilization Fund to buy yen as the currency hit a roughly 40-year low.
Key Takeaways
- Bessent accused Warren of misunderstanding FX markets and offered a "Foreign Exchange for Dummies" tutorial after her Aug. 13 letter on the yen intervention.
- He said Treasury sold euros from the Exchange Stabilization Fund for yen, with no loan to Japan and no new congressional appropriation.
- Bessent warned a "disorderly yen" could trigger forced unwinds and raise U.S. borrowing costs, citing Japan's role as a major Treasury holder.
- He did not disclose how much yen Treasury bought, the execution rate, or the position's current value.
- Japan spent a record $96.5 billion supporting the yen from July 30 to Aug. 26, according to Finance Ministry data released Friday.
What sparked Bessent's attack on Warren?
Warren's Aug. 13 letter asked how Treasury decided to sell euros and buy yen after the Japanese currency plunged. Her opening paragraph suggested American taxpayers could bear costs if Japan were unable to repay Treasury, a framing Bessent rejected.
In his response, Bessent wrote that Warren's letter showed she knows "even less about foreign exchange markets than she does about banking." He said Treasury "exchanged existing Exchange Stabilization Fund foreign-currency assets for yen," adding that Japan owes Treasury nothing because no credit was extended.
CNBC noted Warren's letter later correctly described the move as a sale of euros for yen. Bessent nonetheless called the opening paragraph wrong about the transaction and whether there was a borrower.
Why did Bessent say a disorderly yen threatens U.S. rates?
Bessent framed the intervention as protecting U.S. economic interests, not bailing out Tokyo. He argued Japan is a major holder of U.S. Treasuries, a key trading partner, and a treaty ally, making yen stability relevant to American markets.
"Disorderly yen markets can trigger forced unwinds, which could destabilize global markets and ultimately raise borrowing costs for American families and businesses," he wrote, according to Bloomberg. The operation marked the first coordinated U.S.-Japan effort to strengthen the yen since 1998.
Treasury acted through the New York Fed, selling euros and buying yen. A July 31 Reuters photo showed Bessent's notepad reading "Buy Japanese Yen (JPY) $5-10 bil," though that note did not establish the final purchase size.
What did Bessent leave unanswered?
Despite the sharp tone, Bessent's one-page letter did not resolve several oversight questions Warren raised. He did not say how much yen Treasury bought, the execution rate, or the position's current value, CNBC reported.
He also did not confirm whether the European Central Bank was consulted before the euro sale. Warren fired back on X, citing Bessent's "failed intervention in Treasury markets." Senate Banking Committee Democratic spokeswoman Saloni Sharma said he should focus on reducing living costs rather than "petty grievances." See our Fintech & Crypto Alerts hub for more.
Did the yen intervention work?
Japan spent 15.4 trillion yen, or about $96.5 billion, supporting its currency between July 30 and Aug. 26—a record for that period, according to Japanese Finance Ministry data released Friday. Treasury has not publicly disclosed its own purchase amount.
The yen initially surged after Washington and Tokyo intervened, then gave back much of those gains later in August.