The U.S. dollar has been in relative free fall since late Friday after it emerged that the New York Federal Reserve had conducted a rare “rate check” with currency traders on the dollar/Japanese yen exchange rate. Fortune understands that the check was conducted per a request from the U.S. Treasury.
The purpose of the move implies that the U.S. government may be considering coordinated action with the Bank of Japan to support the latter’s currency.
As a result, traders began selling the dollar, which is now down more than 2.26% over the past five days against a standard basket of international currencies—an unusually steep decline given the gargantuan scale of the dollar in the global economy. Over the last day alone it lost 0.46%. The yen is up more than 3% against the dollar over the same time period. (ING has a detailed blog post on the rate check controversy here.)
The Nikkei 225 stock index fell 1.79% this morning. That’s a sign that traders feared equities exposed to Japan’s export trade would be hurt by a rising yen.
