The U.S. didn’t buy or sell dollars to affect foreign-exchange rates in the second 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 $23.449 billion at the end of June, from $23.719 billion in the prior quarter, the report said. The fund comprises yen and euro holdings.
The Fed’s System Open Market Account holdings of foreign-currency-denominated assets decreased to $23.471 billion in the quarter, from $23.741 billion on March 31.
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 1.7 percent during the quarter, reaching its highest level since July 2010. The greenback depreciated 1.5 percent against the euro and gained 5.2 percent against the yen, the report said.
There was greater volatility across asset classes in the second quarter, resulting in deterioration in liquidity conditions, the report said. Emerging-market currencies were reportedly the most affected. The JPMorgan Global FX Volatility Index increased 2.1 percent during the three-month period, peaking at 11.96 percent in June, the highest level since in more than a year.
At the end of June, the Exchange Stabilization’s Fund’s direct holdings of foreign government securities totaled $21.73 billion.
At the end of the quarter, the Fed had $1.679 billion outstanding in reciprocal currency arrangements, all 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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