US Dollar - USD

Since 1785, the dollar (USD) has been the national currency of the United States and its overseas territories (Porto-Rico) but also of the Salvador, the Marshall Isles or of the East Timor. Main reserve currency used in the world (about 60% of the Central Banks reserves today, this proportion has been decreasing for several years in benefit to the Euro), the Dollar is the most used currency in international trade and the one that as the most important volume of negotiation on the exchange market, the Forex (90% of the currency purchases and sales in the world if we consider this total on 200%).

If the Dollar external value is in theory only decided by the American federal government (via its State Secretary for the Treasury), this value has been in reality determined by the law of supply and demand on the Forex since 1973 and the establishment of floating exchange rates between the main worldwide currencies.

The monetary policy run by the Fed (American Central Bank), via the determination of its key interest rates but also with its direct interventions (Dollar massive purchase or sale, increase of money supply, interventions on the markets of the Treasury bill) have a direct influence on the value of the dollar on the worldwide exchange market (even if this influence is more and more marginal.

Since the abandonment of the fixed exchange rate system (1973) and the end of the convertibility of the dollar in gold, which had been established again at the Bretton Woods Agreements, abandonments required by the increasing tension on the Dollar due to the very important American foreign debt, the Dollar had been first devalued several times, then it has kept being depreciated against the other great currencies, in particular the Deutsche Mark (losing 50% of its value from 1973 to 1979 against this currency).

A continuous rise of the American interest rates (policy decided by the Fed) until 1985, led then to meet the same dollar external value as in 1973.

The Plaza Agreements (September 1985) of the then G5 countries reverse the tendency thanks to a direct and concerted intervention  of the Great Central Banks on the exchange market, and the Dollar will decrease again.

A new « G7 » concerted intervention to make the dollar increase again shows the limit of the direct measures taken by the State on the exchange market, the long-term trend is still the decrease of the dollar one.

The drastic decrease of the key interest rates fixed by the Fed in 2008 (with the aim of an economic recovery) didn’t avoid a dollar repricing (in comparison with the Euro in particular) since July 2008. In July 2008, the parity EUR/USD was at 1.60 and at about 1.30 in April 2009 (0.3 points Euro decrease in 6 months, so it is a dollar rise).