🇺🇸 THE FED IS ONCE AGAIN HINTING AT YEN INTERVENTION , JUST LIKE 1985. LAST TIME, IT HAMMERED THE DOLLAR BY NEARLY 50%.
Back in 1985, the U.S. dollar had surged too far, too fast. American manufacturers were getting crushed, exports were drying up, and trade deficits were ballooning. Political pressure was building fast, with Congress close to slapping major tariffs on Japan and Europe.
To stop the bleeding, the U.S., Japan, Germany, France, and the U.K. gathered in New York at the Plaza Hotel. What followed was a coordinated agreement to weaken the dollar on purpose. They jointly sold dollars and bought other currencies. This became known as the Plaza Accord—and it worked.
Over the next three years:
• The dollar index dropped by nearly 50%.
• USD/JPY collapsed from around 260 to near 120.
• The yen doubled in value.
It was one of the largest currency realignments in modern financial history. When governments act together in foreign exchange markets, traders don’t resist. They adapt. That single decision reshaped global markets.
A weaker dollar triggered:
• A surge in gold
• A rally in commodities
• Strong gains in non-U.S. equities
• Higher asset prices when measured in dollars
Fast forward to today.
The U.S. is still running massive trade deficits. Currency distortions are extreme. Japan is once again a pressure point. And the yen is once again deeply undervalued. That’s why talk of a “Plaza Accord 2.0” is resurfacing.
Just last week, the New York Fed conducted rate checks on USD/JPY, the same preliminary signal used ahead of past FX interventions. It’s a clear message: selling dollars and supporting the yen is on the table, just like in 1985.
No direct intervention has happened yet. But markets reacted anyway. Because they remember what the Plaza Accord led to.
If coordinated dollar weakening begins again, every asset priced in dollars could explode higher.