A 1985 multilateral currency agreement among G5 nations that deliberately weakened the U.S. dollar and reshaped global foreign exchange policy.
Key Facts
- Date signed
- September 22, 1985
- Signing venue
- Plaza Hotel, New York City
- Signatory nations
- France, West Germany, Japan, UK, United States
- Successor agreement
- Louvre Accord, 1987
- Currencies targeted
- Franc, Deutsche Mark, Yen, Pound Sterling vs. USD
Location
Cause → Event → Consequence
By the mid-1980s, the U.S. dollar had appreciated sharply against major currencies, fueling a large American trade deficit and growing protectionist pressure in the United States. The G5 nations agreed that coordinated intervention in currency markets was necessary to correct these global imbalances.
On September 22, 1985, finance ministers and central bank governors of France, West Germany, Japan, the United Kingdom, and the United States signed the Plaza Accord at the Plaza Hotel in New York City. The agreement committed the five governments to jointly intervene in foreign exchange markets to depreciate the U.S. dollar against the franc, Deutsche Mark, yen, and pound sterling.
The U.S. dollar depreciated significantly in the years following the accord, and the agreement was superseded by the Louvre Accord in 1987, which sought to stabilize currencies. Some analysts contend that the resulting appreciation of the Japanese yen contributed to loose monetary conditions in Japan that helped inflate the Japanese asset price bubble of the late 1980s.