The document outlines an event that occurred 30 years ago from today`s perspective: a successful G5 initiative to reverse an overvalued dollar. The Plaza Accord is not considered the exact product of the September 22, 1985 meeting, but a shortcut to a historic change in U.S. policy that began when James Baker became Treasury Secretary in January of that year. The change has had the desired effect in reducing the dollar and reducing the trade deficit. In recent years, a concerted exchange rate intervention, as carried out by the G7 in 1985 and conducted at regular intervals over the next decade, has died out. Indeed, in 2013, for fear of “monetary manipulation”, the G-7 expressly agreed to forego intervention in a kind of “anti-Plaza agreement”. But one day, coordinated exchange interventions will return. Prior to the Plaza Agreement, from 1980 to 1985, the U.S. dollar increased by more than 50% against the yen, the German mark, the French franc and the pound sterling. The strong dollar has put pressure on the U.S. production industry and has pushed many large companies, such as Caterpillar and IBM, to lobby Congress, the Plaza Agreement.
The Plaza Agreement is a 1985 agreement between the G5 countries – France, Germany, the United States, the United Kingdom and Japan – to manipulate exchange rates by devaluing the U.S. dollar against the Japanese yen and the German mark. A second agreement, the Louvre Agreement, was signed in 1987 to put an end to the continued fall of the dollar. One of the unintended consequences of the Plaza agreement was that it led Japan to increase its trade and investment with East Asia, making it less dependent on the United States. From 1980 to 1985, the dollar appreciated by about 50% against the Japanese yen, the Deutsche Mark, the French franc and the pound sterling, the currencies of the four largest economies of its time.  In March 1985, just before the G7, the dollar reached the highest mark ever recorded against sterling, an assessment that has not been crowned for more than 30 years.  This caused considerable hardship to the American industry, but at first its lobbying was largely ignored by the government. The financial sector was able to benefit from the rising dollar and a devaluation could have run counter to the Reagan administration`s plans to reduce inflation. A broad alliance of manufacturers, service providers and farmers responded with an increasingly large campaign calling for protection from foreign competition. signed in September 1985 at the Plaza Hotel in New York, between France, West Germany, Japan, the United States and the United Kingdom, to devalue the us dollar against the Japanese yen and the German mark by intervening in the foreign exchange markets. The U.S. dollar depreciated considerably from the date of the agreement, until it was replaced by the Louvre agreement in 1987.
   Its main objective was to increase the competitiveness of U.S. and European exports through monetary control relative to Japanese exports. The dollar`s rise came after the Federal Reserve, led by Paul Volcker, virtually eased inflationary pressures in the U.S. economy, which contributed to a strong dollar. The U.S. currency was also boosted by rising budget deficits during President Reagan`s tenure. Overall, between 1980 and 1985, the dollar increased by about 50% against major currencies, contributing to a growing U.S. trade deficit and increased demands for protectionist measures in Congress. In two and a half years, until the end of 1987, the U.S. dollar had fallen 54% against the Japanese yen and the German mark from its february 1985 high.