Thoughts in the currency market are turning toward the Plaza Hotel. The stately pile at the southeast corner of Central Park has a lasting place in American culture as the scene of Tom Buchanan’s confrontation with Jay Gatsby in The Great Gatsby; in the financial world, it has lasting fame as the place where world finance ministers and central bankers came together in September 1985 to agree on intervening to weaken the dollar against the West German deutsche mark and the Japanese yen. The effect was dramatic (if not as dramatic as Daisy Buchanan’s choice between her husband and her lover):
The ministerial intervention was successful and achieved what its backers wanted. The dollar has never regained its pre-Plaza highs from early 1985. But now, wishful thoughts are returning to the Plaza Accord once more. As the chart shows, the dollar is still far below its 1985 high in nominal terms. On a real effective basis, taking…
