In the post-Bretton Woods era, US interventions in foreign exchange markets have become rare in the twenty-first century. Under the influence of the Plaza and Louvre Accords, US foreign exchange policy evolved under the “strong dollar” stance adopted by Treasury Secretary Robert Rubin in the 1990s. Interventions have been limited in the twenty-first century, with notable instances in 2000 and 2011. Recent US administrations have generally favored market-determined exchange rates, although the Trump administration’s trade policies have brought more debate about foreign exchange.
the main points:
- Policy shift in the 1990s: After the Plaza and Louvre Accords, the Clinton administration focused on a “strong dollar,” which encouraged capital inflows and lowered Treasury borrowing costs.
- Limited interventions in the twenty-first century:
- September 2000: The United States sold $1.3 billion to support the euro as part of a coordinated G7 intervention.
- March 2011: The US bought $1 billion and sold yen to ease pressure on the yen’s appreciation after the Fukushima disaster.
- Trump Administration: Emphasizing the importance of trade in economic policy, with discussions of foreign exchange increasing in frequency. Treasury Secretary Steven Mnuchin stated in 2020 that a weaker dollar is good for trade.
- current situation: US Treasury Secretary Yellen stressed the importance of floating exchange rates and G20 commitments.
Conclusion:
US interventions in the foreign exchange market have become rare since the 1990s, with a shift toward market-determined exchange rates. Large interventions in 2000 and 2011 were coordinated through the G7. The Trump administration has brought more dialogue to the foreign exchange market, but recent policies under Secretary of State Janet Yellen still emphasize floating exchange rates and international commitments.
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