(Bloomberg) -- Foreign central bank usage of a key Federal Reserve facility rose to a fresh all-time high, an indication policymakers worldwide keep building cash positions, especially amid reports Japan may have intervened to bolster its currency.
Monetary officials stashed a total $399 billion at the Fed’s reverse repurchase agreement facility, according to data for the period through July 10, up from $385 billion a week earlier, a $13.7 billion increase. It surpassed the previous all-time high of $390 billion in the week through June 26.
The foreign reverse repo pool, like the domestic RRP, is a place where counterparties can park cash overnight with the Fed. Monetary authorities such as the Bank of Japan can keep a big chunk of funds there earning interest instead of in Treasury bills and other securities. And when they need to do something with those dollars, they can just withdraw it from the facility without ruffling markets.
Elsewhere, central bank holdings of Treasury securities fell during the same period, with holdings totaling $2.923 trillion from $2.931 trillion, a roughly $8 billion drop, data show. A separate cash account used by central banks was little changed at $9.68 billion.
The yen rapidly soared more than 2% against the dollar after a softer-than-expected reading of US inflation on Thursday, prompting speculation that Japan stepped into the market to support its currency. The nation’s top currency official, Masato Kanda, said he wasn’t in a position to say if the move was an intervention. He said that authorities would disclose an intervention at month-end if one occurred.
The yen touched its weakest since 1986 just last week, fueling a new wave of jawboning from Japanese authorities about their willingness to act to bolster the currency if necessary.
Japan has acknowledged it spent ¥9.8 trillion ($61.3 billion) intervening in currency markets between April 26 and May 29. Although specific dates weren’t disclosed, trading patterns suggest major interventions occurred on April 29 and May 1. Data on foreign reserves suggest Japan sold Treasuries to fund these actions.
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