US dollar continues to climb after G7 fails to agree on method to tackle ‘volatile’ markets | World | New


While a strong dollar can relatively control the prices of commodities such as oil and gold, it can also put financial pressure on the developing world, many of which borrow money in US dollars instead. of their own currencies. G7 nations held a meeting of global financial experts last week to seek an arrangement similar to the 1985 “Plaza Accord” which saw nations reduce the strength of the dollar.

The Plaza deal saw the dollar lose about 25% of its value the following year due to the efforts of France, Japan, the United Kingdom, the United States and West Germany which acted to reduce the US trade deficit.

However, the G7 failed to find a solution but with encouragement from Japan, financial leaders said on Wednesday they would closely analyze “recent volatility” in the markets.

However, this warning and Japanese Finance Minister Shunichi Suzuki’s threat of another yen-buying intervention did not prevent the currency from falling to a 32-year low against the dollar at the end of the week.

There is currently no plan among advanced economies that there is no coordinated course of action despite allies complaining about the consequences of the US central bank’s interest rate hike strategy.

On Thursday, Suzuki held a press conference following meetings with G7 and G20 finance officials in Washington.

He said: “Many countries have seen the need to be vigilant about the ripple effects of global monetary tightening and have mentioned currency movements in this context.

“But there was no discussion of coordinated action that could be taken.”

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With the United States vetoing the idea of ​​a coordinated deal, other countries began raising interest rates to protect their currencies at the cost of slowing economic growth.

South Korea’s Central Bank governor, Governor Rhee Chang-yong, said on Saturday that international cooperation may be needed “after a certain period of time.”

He said: “I think a dollar that’s too strong, especially for a substantial period of time, won’t be good for the United States either, and in fact I’m thinking of the long-term implication for the trade deficit, and perhaps to another global issue an imbalance may occur.


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