No. 2188

THURSDAY, JULY 30, 1998

U. S. INTERVENTION IN SECOND QUARTER TOTALS
$833 MILLION, NEW YORK FED REPORTS

NEW YORK -- The U.S. monetary authorities intervened in the foreign exchange markets on one occasion on June 17, selling a total of $833 million dollars for Japanese yen, the Federal Reserve Bank of New York reported today.

In detailing its foreign exchange operations during the second quarter, the New York Fed’s report to Congress noted that the yen fell 4.1 percent against the dollar and 6.2 percent against the German mark. The dollar declined 2.2 percent against the mark during the quarter.

The intervention was carried out by the foreign exchange trading desk at the New York Fed, operating in coordination with the Japanese monetary authorities. The amount was split evenly between the Federal Reserve System and the U.S. Treasury’s Exchange Stabilization Fund (ESF).

Statements describing the operation were issued by Prime Minister Hashimoto in Japan and Treasury Secretary Rubin in Washington. Rubin’s statement confirmed that the action was taken in cooperation with the Japanese monetary authorities and, "... in the context of Japan’s plans to strengthen its economy."

In the days following the operation, the yen strengthened on heightened expectations that the Japanese government would produce effective domestic policy measures to restore growth and address banking sector difficulties, the report stated.

The report, presented by Peter R. Fisher, executive vice president of the New York Fed and the Federal Open Market Committee’s (FOMC) manager for the system open market account, provided the details of the foreign exchange desk’s operations.

The Federal Reserve and ESF had foreign exchange reserve holdings valued at $17.3 billion and $13.9 billion, respectively at the end of June.