Goldman Sachs Group has stated that US backing for Japan's efforts to support the yen is unlikely to damage the dollar's status as the world's primary reserve currency. Japan, as the largest foreign investor in the $31 trillion US Treasury market, was involved in a joint currency intervention last month, which sparked concerns that US support for the yen—perhaps aimed at preventing unwanted volatility in US bonds—could weaken confidence in the dollar's reserve status.

Goldman Sachs argued that this concern assumes the US might in the future try to prevent other countries from selling US Treasuries. Strategists including Michael Cahill wrote in a report, "This seems far-fetched," adding, "We are skeptical about claims that this poses a negative impact on the dollar's reserve status." The bank noted that Japan can use the Federal Reserve's Foreign and International Monetary Authorities (FIMA) repo facility, which allows foreign central banks to raise dollars using their holdings of US Treasuries without selling them. The report stated that this underscores a key advantage of the dollar: having a deep capital market for building reserves during normal times and access to liquidity during periods of stress.

The strategists added, "We believe the US Treasury's actions, along with the availability and utility of the FIMA facility, help demonstrate that no other currency currently matches the dollar in terms of practicality, network effects, and supportive infrastructure." Despite US Treasury yields hovering near multi-year highs, the dollar has weakened.

The joint effort by Washington and Tokyo to support the yen was the first of its kind in nearly three decades. Although the intervention was conducted through the euro to avoid disrupting the US Treasury market, some investors worry that direct US support for the yen could inadvertently weaken the dollar and reduce the appeal of US bonds as a reserve asset. The specific operational mechanism of the intervention also drew attention. Last week, the US sold euros to buy yen without prior notice to the European Central Bank, informing EU officials only afterward. Strategist Kristine Aquino stated, "The factors behind the dollar and bond markets seem more deeply entrenched. For the dollar, the ripple effects of the US-Japan joint yen intervention are another major catalyst."

This is not to say that Goldman Sachs sees no risks to the dollar's dominance. The strategists acknowledged that policy uncertainty could erode its global role—a concern central to their bearish outlook on the dollar for 2025. However, they argued that applying these concerns to US support for the yen is a stretch. The bank noted there are precedents for countries using their holdings of US Treasuries to support their currencies without facing opposition from Washington. For example, in March, multiple countries sold large amounts of US Treasuries to support their currencies amid signs of market stress. "We believe that such forced selling events, over time, actually help to solidify the dollar's role," the strategists wrote.