The U.S. didn’t buy or sell dollars to affect foreign-exchange rates in the third quarter, the Federal Reserve Bank of New York said in a report to Congress.
The value of the Treasury’s Exchange Stabilization Fund was steady at $23.45 billion at the end of September from the prior quarter, today’s report said. The fund comprises yen and euro holdings.
The Fed’s System Open Market Account holdings of foreign-currency-denominated assets were at $23.47 billion in the quarter, little changed from the previous period.
The New York Fed, which acts for the U.S. Treasury and the Fed in the $5.3 trillion daily currency market, intervened in the currency market in 2011 for the first time since 2000. The Fed bought $1 billion of the U.S. currency on March 18, 2011, when Group of Seven nations sought to halt the surge in the yen after Japan was struck by the nation’s worst earthquake on record.
The central bank’s nominal trade-weighted measure of the U.S. dollar fell 3 percent from July through September, after reaching its highest level since July 2010 early in the quarter. The greenback depreciated 3.8 percent and 6 percent against the euro and the pound, respectively, the report said.
Emerging-market currencies, including the Turkish lira, Brazilian real and Indian rupee, dropped against the greenback during the period as investors reduced exposures to countries with above-target inflation, relatively large current account and fiscal deficits, and weaker growth outlooks, according to the report. The 20-most traded emerging-market currencies fell 0.2 percent in the three-month period, a third quarter of decline.
At the end of June, the Exchange Stabilization Fund’s direct holdings of foreign government securities totaled $22.24 billion.
At the end of the quarter, the European Central Bank had $511 million outstanding in reciprocal currency arrangements, all through the dollar swap line with the Fed.
The swap lines were provided by the Fed, also with central banks of Japan, Switzerland, Canada, Mexico and the U.K., as part of measures taken since 2007 to combat the effects of the worst financial crisis since the Great Depression. The emergency liquidity tool, which provides dollars as needed, was reintroduced in May 2010 in response to renewed demand by overseas banks for dollar-based funding.