US Dollar continues to climb after G7 fail to agree on method to tackle ‘volatile’ markets

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

The Plaza Accord saw the dollar lose approximately 25 percent of its value in the following year due to the efforts of France, Japan, the United Kingdom, the United States and West Germany who acted to reduce US trade deficit.

However, the G7 failed to come up with a solution but with strong encouragement from Japan, the finance leaders said on Wednesday that they will closely analyse “recent volatility” in markets.

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

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

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

He said: “Many countries saw the need for vigilance to the spill-over effect of global monetary tightening, and mentioned currency moves in that context.

“But there wasn’t any discussion on what coordinated steps could be taken.”

READ MORE: Biden blasted for criticising Truss’s economic policy

With the US vetoing the idea of a coordinated deal, other nations have taken to increasing interest rates in order to protect their currencies at the cost of slowing economic growth.

The Governor of South Korea’s central bank, Governor Rhee Chang-yong said on Saturday that international cooperation may be necessary “after a certain period”.

He said: “I think a too-strong dollar, especially for a substantial period, won’t be good for the United States either, and actually I’m thinking about the long-term implication for the trade deficit, and maybe another global imbalance may happen.”



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