The Dollar and Other Key Currencies

The Issue

The foreign exchange value of the dollar has to substantially decline to make a serious dent in the record US current account deficit of nearly $800 billion, almost 7 percent of US GDP. Asian currencies that have not yet appreciated significantly against the dollar, especially the Chinese renminbi, will need to rise sharply. Asian and other central banks must cease intervening in the exchange markets and accumulating massive amounts of dollar reserves to permit the market to begin the needed exchange rate corrections. An Asian Plaza Agreement to coordinate exchange rate realignments in that region may be necessary given the reluctance of the individual countries to appreciate sharply and lose competitiveness.

Essential Reading from the Institute

Article: The Dollar and the Deficits: How Washington Can Prevent the Next Crisis
by C. Fred Bergsten, Peterson Institute for International Economics
Article in Foreign Affairs, Volume 88 No. 6, November/December 2009
November 2009

Book: Long-Term International Economic Position of the United States
Special Report No. 20
edited by C. Fred Bergsten
April 2009

Op-ed: America Cannot Resolve Global Imbalances on Its Own
by C. Fred Bergsten, Peterson Institute for International Economics
and Arvind Subramanian, Peterson Institute for International Economics
Op-ed in the Financial Times
August 19, 2009

Book: Accountability and Oversight of US Exchange Rate Policy
by C. Randall Henning
June 2008

Policy Brief 09-21: The Future of the Dollar [pdf]
by Richard N. Cooper, Harvard University
September 2009

Policy Brief 09-20: Why SDRs Could Rival the Dollar [pdf]
by John Williamson, Peterson Institute for International Economics
September 2009

Book: Dollar Adjustment: How Far? Against What?
edited by C. Fred Bergsten and John Williamson
November 2004

Book: Dollar Overvaluation and the World Economy
Special Report No. 16
edited by C. Fred Bergsten and John Williamson
February 2003

Op-ed: How to Solve the Problem of the Dollar
by C. Fred Bergsten, Peterson Institute for International Economics
Op-ed in the Financial Times
December 11, 2007

Testimony: The Dollar and the Renminbi
by C. Fred Bergsten, Peterson Institute for International Economics
Statement before the Hearing on US Economic Relations with China: Strategies and Options on Exchange Rates and Market Access, Subcommittee on Security and International Trade and Finance, Committee on Banking, Housing and Urban Affairs, United States Senate
May 23, 2007

Policy Brief 10-2: Notes on Equilibrium Exchange Rates: January 2010 [pdf]
by William R. Cline, Peterson Institute for International Economics
and John Williamson, Peterson Institute for International Economics
January 2010

Book: Euro at Ten: The Next Global Currency?
edited by Jean Pisani-Ferry and Adam S. Posen
July 2009

Testimony: Currency Misalignments and the US Economy
by C. Fred Bergsten, Peterson Institute for International Economics
Testimony before the Subcommittees on Trade, Ways and Means Committee; Commerce, Trade and Consumer Protection, Energy, and Commerce Committee; and Domestic and International Monetary Policy, Trade and Technology, Financial Services Committee of the House of Representatives
May 9, 2007

Policy Brief 07-4: Global Imbalances: Time for Action [pdf]
March 2007

Testimony: China's Exchange Rate Regime
by Morris Goldstein, Peterson Institute for International Economics
Testimony before the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology Committee on Financial Services
US House of Representatives
Washington, DC
October 1, 2003

Testimony: The Correction of the Dollar and Foreign Intervention in the Currency Markets
by C. Fred Bergsten, Peterson Institute for International Economics
Testimony before the Committee on Small Business
United States House of Representatives
Washington, DC
June 25, 2003

Op-ed: A Modest Proposal for China's Renminbi
by Morris Goldstein, Peterson Institute for International Economics
and Nicholas R. Lardy, Peterson Institute for International Economics
Op-ed from the Financial Times
August 26, 2003

Speech: The Euro and the World Economy [pdf]
by C. Fred Bergsten, Peterson Institute for International Economics
Speech at a conference on "The Eurosystem, the Union and Beyond: The Single Currency and Implications for Governance"
European Central Bank
Frankfurt am Main, Germany
April 27, 2005

Book: Is the U.S. Trade Deficit Sustainable?
by Catherine L. Mann
September 1999