In a prepared report, the Fed announces "U.S. monetary authorities did not intervene in the foreign exchange markets during the quarter." That's great, now if only they could do the same for all non-Treasury, MBS, and Agency (we know they more than intervened there) asset classes, everything would be peachy.
This is how the Fed explains the FX activity in Q2:
Foreign exchange markets experienced considerable volatility during the quarter, but overall trading conditions were deemed orderly by market participants. The dollar appreciated against most G-10 currencies during the first two months of the quarter, as ongoing concerns about fiscal sustainability and the growth outlook in some euro-area peripheral countries weighed on sentiment toward riskier assets. In early June, however, the dollar began to depreciate against the euro following weaker-than-expected data releases in the United States in conjunction with moderately stronger-than-expected growth indicators in Europe. The stability of the euro may have been aided by a decline in the uncertainty that had accompanied several key risk events in the euro area and by the cumulative effect of a number of policy announcements by European officials.
And here is the Fed's justification for recommencing the liquidity swap lines:
Strains in short-term funding markets reemerged in Europe during the quarter, as concerns over fiscal deficits and growth prospects in peripheral European countries remained elevated. In response to these strains, the Federal Reserve reactivated U.S. dollar liquidity swap facilities with the Bank of England (BoE), the European Central Bank (ECB), the Swiss National Bank (SNB), the Bank of Japan (BoJ), and the Bank of Canada (BoC). The reactivation of these liquidity swap lines was designed to improve liquidity conditions in global money markets and to minimize the risk that strains abroad could spread to U.S. markets, by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions.
The Fed also notes the persistent rise in European overnight funding indices:
Also a result of bank funding strains, the implied dollar funding rate observed in foreign exchange swaps on major currencies rose more than the U.S. dollar Libor.
Um, what bank funding strains? Didn't the National Lampoons European Stress Test confirm all is well?
The Fed discloses it foreign reserves:
As of June 30, direct holdings of foreign government securities totaled $23 billion, split evenly between the Federal Reserve System Open Market Account and the U.S. Treasury Exchange Stabilization Fund. Foreign government securities held under repurchase agreements totaled $4.5 billion at the end of the quarter and were also split evenly between the two authorities.
All in all, nothing new here.