🇺🇸🇯🇵 THE PLAZA ACCORD GHOST: THE FED LOOKS AGAIN AT THE YEN 🇯🇵🇺🇸
In 1985, the American dollar had become too strong.
U.S. factories were losing competitiveness, exports were collapsing, and the trade deficit was exploding.
Congress threatened tariffs against Europe and Japan.
Thus was born the Plaza Accord, one of the most important events in modern monetary history.
In New York, the United States, Japan, West Germany, France, and the United Kingdom agreed to deliberately weaken the dollar.
They sold dollars and bought yen and other currencies.
The result was historic: in just three years, the dollar index plummeted by almost 50%, while the USD/JPY fell from 260 to 120.
The yen doubled in value and a new era opened for global markets.
A weaker dollar pushed gold, commodities, and dollar-denominated assets higher.
It was an economic reset coordinated by governments, and markets aligned.
Today, the similarities are striking: large trade imbalances, weak yen, and rising currency tensions.
The New York Fed recently conducted "rate checks" on the USD/JPY, a typical move that anticipates possible direct interventions.
No official action has yet taken place, but the markets have reacted nonetheless.
Because they remember what the Plaza Accord meant.
And if history were to repeat itself, we could witness a new global rally of all dollar-denominated assets.