Scott Bessent’s Yen Rescue Shows the 1992 Sterling Poacher Turned Market Gamekeeper

Britain has learned the hard way that August can be a punishing month in the foreign exchange markets.

In the sweltering summer of 1976, sterling was hit by intense selling, forcing the Bank of England to burn through its reserves in an effort to defend the pound. By October, the UK had little option but to turn to the International Monetary Fund for a bailout.

A similar drama played out in 1992, when the Bank waged another losing battle through the summer to keep the pound within the Exchange Rate Mechanism. Sterling was ultimately forced out that September.

This time, the pressure is not on the pound but on the Japanese yen. Scott Bessent, the US Treasury Secretary who once traded for George Soros and backed the famous wager against sterling’s place in the ERM, has found himself helping to lead efforts to stabilise Japan’s currency.

After the yen sank to a record low against the dollar on July 29, the US and Japan moved aggressively, injecting billions of dollars into global currency markets.

The scale and timing of the American move raised eyebrows. Central banks usually avoid propping up currencies unless trading turns ‘disorderly’ — market language for a slide that risks becoming outright panic.

There was no obvious crisis at the time, but officials in Washington were worried that the Bank of Japan’s benchmark interest rate of 1 per cent remained too low to contain inflation, raising fears that pressure on the yen could spill over into a wider market sell-off.

A key fear in Washington was that Tokyo, the world’s biggest holder of US debt, might sell American bonds to support its currency. That would drive yields on US Treasuries and American borrowing costs higher.

Moreover, a yen under siege was a potential shock, which could spread to Korea and trigger a broader Asian collapse similar to what happened in 1997.

Bessent’s determination to assist was inadvertently revealed when a Reuters photographer caught the Treasury Secretary clutching a piece of paper with a yen symbol and $5billion to $10billion scrawled on it. 

The most unusual aspect of the decision to support the yen was that the Americans chose to use euro reserves for the operation. 

This was largely because the US didn’t want to trigger panic in the bond markets. By strengthening the yen, the US also helped to make Japanese goods more expensive in the US, improving its trade deficit.

Bessent, with the support of the White House, views currency activism as a political tool. In October 2025, the Administration bought Argentine pesos to bolster the radical economic and monetary reforms forced through by Trump ally President Javier Milei.

The Administration is calling on the Federal Reserve to bolster its Foreign and International Monetary Authorities facility to $60bn. This would provide extra firepower when the US government chooses to jump into currency markets.

Bessent, the sterling poacher of 1992, is now the gamekeeper.

O’Neill speaks

BP’s bumper second-quarter profits of $5.7billion predictably have green campaigners foaming at the mouth.

Campaigning group Global Witness went as far as to quote Donald Trump, author of the ‘drill, baby, drill’ mantra, who recently requested that big oil rein in its profiteering. 

BP, which has a large and sophisticated trading arm, has benefited from price volatility caused by the President’s endless social media posts about his on-off war in the Middle East.

The UK oil major has been through its own home-grown volatility. It has employed three chief executives in two years, had two permanent chairmen and had a vacancy since Albert Manifold was ousted in a boardroom coup in May.

Chief executive Meg O’Neill sounded like a football manager when she felt it necessary to tell a CNBC interviewer: ‘I have the full support of the board.’

Last week’s decision by BP to pull out of the North Sea after 60 years is a political embarrassment for Prime Minister Andy Burnham’s government as it ponders whether to authorise new drilling.

But O’Neill’s desire to focus on what she calls BP’s ‘high-grade’ assets is at least a plan when there has been confusion.

The BP boss offered a paean of praise for North Sea production. She argued that the UK ‘should be using domestic resources first instead of buying from a third party’.

That displays more than a whiff of hypocrisy.