U.S. Didn’t Intervene in Currency Markets in Fourth Quarter

The U.S. didn’t buy or sell dollars to affect foreign-exchange rates in the fourth quarter, the Federal Reserve Bank of New York said in a report to Congress.

The value of the Treasury’s Exchange Stabilization Fund fell to $24.950 billion at the end of December, from $25.766 billion in 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 decreased to $24.972 billion in the quarter, from $25.788 billion on Sept. 30.

The New York Fed, which acts for the U.S. Treasury and the Fed in the $4 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 increased 1 percent during the quarter, with the greenback depreciating 2.5 percent against the euro and gaining 11.3 percent against the yen, the report said.

At the end of December, the Exchange Stabilization’s Fund’s direct holdings of foreign government securities totaled $23.67 billion.

At the end of the quarter, the Fed had $8.889 billion outstanding in reciprocal currency arrangements, most through the dollar swap line with the European Central Bank.

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.

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