{
  "title": "The Dollar, the Yen and European Currencies--Address by Michel Camdessus",
  "publication": "IMF News, November 17, 1995",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/spmds9518",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/spmds9518",
  "overlayPath": "/en/news/articles/2015/09/28/04/53/spmds9518/index.md",
  "summary": "Speech given at the XIV Sesiones de Trabajo de Tesoreria, Caja de Ahorros de Navarra, Pamplona, Spain",
  "publishDate": "1995-11-17",
  "sections": [
    {
      "heading": "Context and purpose",
      "content": "- Speech delivered at the XIV Sesiones de Trabajo de Tesoreria, Caja de Ahorros de Navarra, Pamplona, Spain, November 17, 1995.\n- Purpose: examine roles of the dollar, the yen, and European currencies; assess effectiveness of exchange arrangements for exchange rate stability; explore government and IMF actions to encourage greater exchange rate stability in the face of powerful private markets."
    },
    {
      "heading": "Roles of the major currencies",
      "content": "- Dollar:\n  - Remains \"the most international of the world's currencies.\"\n  - Currency in which most official reserves are held.\n  - Most foreign exchange transactions involve the dollar.\n  - Most trade transactions are denominated in dollars.\n- Yen:\n  - Has some international role but is primarily a national currency.\n  - Role not commensurate with Japan's economy or creditor status.\n  - Limited use as an invoicing currency for Japanese trade and regionally.\n  - Part of the SDR valuation basket.\n- European currencies:\n  - Primarily national currencies; some important regionally.\n  - Deutsche mark is the most important European currency and linchpin of the ERM/EMS.\n  - In some European markets (France, Spain), transaction volume in deutsche mark exceeds that in dollars.\n  - Extensive use of deutsche mark in Central and Eastern Europe.\n- Pegging/zones:\n  - \"23 countries that peg their currencies to the dollar.\"\n  - \"25 countries whose currencies are linked through the EMS (including 14 African countries that peg to the French franc).\"\n  - \"There are no currencies pegged to the yen.\""
    },
    {
      "heading": "Exchange arrangements and historical performance",
      "content": "- Post-Bretton Woods (since 1973):\n  - Dollar, yen, and deutsche mark have operated under \"managed floating\"—no fixed relationship but occasional interventions and policy shifts to affect exchange rates.\n  - ERM (initiated 1979): intended to reduce volatility; later focused on controlling inflation and macroeconomic convergence; became central to movement toward EMU.\n- System resilience and shortcomings:\n  - System since 1973 \"has proven to be reasonably resilient\"—handled oil crises 1973 and 1979 and accommodated cyclical differences in 1980s/1990s.\n  - EMS enhanced monetary and fiscal discipline, narrowed inflation and interest differentials, helped intra-European trade.\n  - Shortcomings: increased exchange rate volatility since 1973; emergence of currency misalignments that can persist and cause damage (misallocation, protectionism, trade frictions)."
    },
    {
      "heading": "Key statistics and market facts (preserved exactly)",
      "content": "- \"Daily turnover in these markets is now over $1.2 trillion.\"\n- During 1985-94, official holdings of international reserves averaged:\n  - 54 percent denominated in dollars\n  - 15 percent in deutsche mark\n  - 8 percent in yen\n  - 3 percent in pounds sterling\n  - 2 percent in French francs\n- Proportion of transactions (Bank for International Settlements survey):\n  - 83 percent involving the dollar\n  - 37 percent for the deutsche mark\n  - 24 percent for the yen\n- Invoicing of exports:\n  - Nearly half of the exports of industrial countries denominated in dollars\n  - About one quarter in deutsche mark\n  - Only one tenth or less each in pounds sterling, French francs, and Japanese yen\n- Use of yen in Japanese trade:\n  - Only a third of Japanese exports denominated in yen\n  - 40 percent of Japan's exports to Asia and Pacific denominated in yen\n  - 20 percent of Japan's imports from Asia and Pacific denominated in yen\n- Footnote observation: \"since each transcaction involves two currencies, the sum of all transactions in all currencies amounts to 200 percent.\""
    },
    {
      "heading": "Problems highlighted",
      "content": "- Exchange rate volatility:\n  - \"Dramatic increase in exchange rate volatility\" since breakdown of Bretton Woods.\n  - Exchange rates of dollar, yen, deutsche mark \"much more volatile\" than before 1973 and more volatile than consumer price indices or other economic measures.\n- Currency misalignments:\n  - When exchange rates depart from fundamentals for relatively long periods; can cause serious damage (misallocating resources, deepening adjustment problems, fueling protectionist pressures).\n  - Examples: overvalued dollar in mid-1980s; misalignments within EMS causing turmoil.\n- Private-market power vs official resources:\n  - EMS crises of 1992-93 showed private resources often far exceed amounts monetary authorities can mobilize to defend parities.\n- Overreliance on exchange regimes:\n  - Placing too much reliance on regime mechanics and not enough on underlying policy fundamentals is perilous (lessons from 1992-93 ERM strains).\n- Policy attention lapse:\n  - Failure to maintain Louvre \"reference ranges\" in February 1987 attributed to reliance on pronouncements instead of policies and domestic preoccupations (US recovery, Japan financial crisis, Germany reunification)."
    },
    {
      "heading": "Lessons and policy recommendations",
      "content": "- Correct macroeconomic imbalances promptly:\n  - \"When macroeconomic imbalances do occur, they should be corrected as soon as possible\" to reduce risk of market turmoil and credibility loss.\n  - Exchange market intervention has a limited, temporary role as a signal; policy changes are required to convince markets of alignment with fundamentals.\n- Major countries' responsibilities:\n  - Prominence of dollar, yen, European currencies implies special obligations for the United States, Japan, and European countries.\n  - United States: pursue monetary and fiscal policies that promote price stability and enhance domestic savings; cooperate internationally to promote exchange rate stability.\n  - Japan, Germany, and other European countries: ensure economic fundamentals are sound; strengthen economic policies to contribute to global stability.\n- Specific domestic reforms:\n  - Fiscal consolidation: \"considerably more action is needed\" to reduce fiscal deficits and public debt as a share of GDP, especially given aging populations.\n  - Expenditure-focused consolidation; reform major transfer programs (pension and health care systems, subsidies, indexation).\n  - Japan: strengthen domestic banking system; deregulate economy; expose it to greater competition.\n  - Europe: labor market reforms to reduce structural unemployment and help fiscal consolidation; create a \"virtuous circle\" of reforms leading to lower interest rates, investment, growth, and improved employment.\n- European Monetary Union:\n  - Continue and, in some countries, intensify efforts toward monetary union.\n  - Fiscal consolidation should \"go much further than the Maastricht criteria require.\"\n- Multilateral coordination and leadership:\n  - Countries must pursue more effective multilateral coordination: understand others' policies, listen to outside judgments, take enlightened view of national interests, and have leadership to act.\n  - G-7 should resist significant depreciation of the dollar from then-present levels and ensure commitments are credible by addressing fundamental policy requirements for a stronger dollar and a more realistically valued yen.\n  - IMF should maintain candid dialogue with the G-7 and encourage continuous policy coordination, not just reactive measures."
    },
    {
      "heading": "IMF role and surveillance",
      "content": "- Surveillance as principal IMF contribution:\n  - Regular, thorough, candid consultations with each of its 180 members, usually once a year or more often as needed, covering fiscal, monetary, exchange rate, and structural issues.\n  - Aim: encourage strong and consistent economic policies to lead to exchange rate stability and sustainable growth.\n- Strengthening surveillance post-Mexico:\n  - Ensure more regular and timely provision of data to the Fund.\n  - Intensify dialogue with country authorities.\n  - Greater attention to soundness of domestic banking systems, financial flows and sustainability, countries with greater risks, and potential spillovers.\n  - Developing standards to guide members in provision of economic and financial data to the public.\n- Complementarity with market discipline:\n  - Markets provide discipline but not always smoothly; IMF surveillance can encourage timely policy adjustments before markets force costlier corrections."
    },
    {
      "heading": "Recent developments and outlook (as of speech)",
      "content": "- Encouraged by industrial countries' action \"last August\" to reinforce the dollar's slight recovery against the yen.\n- Judgment that major currencies were \"within, broadly speaking, an acceptable range,\" but:\n  - \"U.S. dollar continues to look weak against the deutsche mark and closely linked European currencies, as well as against the Japanese yen.\"\n  - From a macro perspective, a stronger U.S. dollar and slightly weaker deutsche mark and yen \"might seem appropriate\" given respective cyclical conditions.\n- G-7 declaration in Washington in October welcomed orderly reversal in major currency movements, reaffirmed commitment to reduce imbalances and cooperate closely in exchange markets.\n- IMF should persevere in candid G-7 dialogue and encourage continuous policy coordination to detect and avert misalignments early.\n\nSource: The Dollar, the Yen and European Currencies—Address by Michel Camdessus, November 17, 1995, International Monetary Fund.\n\n---\n\n\n References\n\n- Germany and the IMF\n- Spain and the IMF\n- France and the IMF\n- Japan and the IMF\n- United States and the IMF\n- IMF Policy Advice -- A Factsheet\n- Speeches\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/spmds9518"
    }
  ],
  "bullets": [
    "[Markdown version](/en/news/articles/2015/09/28/04/53/spmds9518/index.md)",
    "[Structured JSON version](/en/news/articles/2015/09/28/04/53/spmds9518/index.json)",
    "[Bundle manifest](/en/news/articles/2015/09/28/04/53/spmds9518/bundle-manifest.json)",
    "Published: November 17, 1995",
    "Speech delivered at the XIV Sesiones de Trabajo de Tesoreria, Caja de Ahorros de Navarra, Pamplona, Spain, November 17, 1995.",
    "Purpose: examine roles of the dollar, the yen, and European currencies; assess effectiveness of exchange arrangements for exchange rate stability; explore government and IMF actions to encourage greater exchange rate stability in the face of powerful private markets.",
    "Dollar:",
    "Yen:",
    "European currencies:",
    "Pegging/zones:",
    "Post-Bretton Woods (since 1973):",
    "System resilience and shortcomings:",
    "\"Daily turnover in these markets is now over $1.2 trillion.\"",
    "During 1985-94, official holdings of international reserves averaged:",
    "Proportion of transactions (Bank for International Settlements survey):",
    "Invoicing of exports:",
    "Use of yen in Japanese trade:",
    "Footnote observation: \"since each transcaction involves two currencies, the sum of all transactions in all currencies amounts to 200 percent.\"",
    "Exchange rate volatility:",
    "Currency misalignments:",
    "Private-market power vs official resources:",
    "Overreliance on exchange regimes:",
    "Policy attention lapse:",
    "Correct macroeconomic imbalances promptly:",
    "Major countries' responsibilities:",
    "Specific domestic reforms:",
    "European Monetary Union:",
    "Multilateral coordination and leadership:",
    "Surveillance as principal IMF contribution:",
    "Strengthening surveillance post-Mexico:",
    "Complementarity with market discipline:",
    "Encouraged by industrial countries' action \"last August\" to reinforce the dollar's slight recovery against the yen.",
    "Judgment that major currencies were \"within, broadly speaking, an acceptable range,\" but:",
    "G-7 declaration in Washington in October welcomed orderly reversal in major currency movements, reaffirmed commitment to reduce imbalances and cooperate closely in exchange markets.",
    "IMF should persevere in candid G-7 dialogue and encourage continuous policy coordination to detect and avert misalignments early.",
    "[Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)",
    "[Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm)",
    "[France and the IMF](http://www.imf.org/external/country/FRA/index.htm)",
    "[Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm)",
    "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
  ],
  "alternates": {
    "markdown": "/en/news/articles/2015/09/28/04/53/spmds9518/index.md",
    "json": "/en/news/articles/2015/09/28/04/53/spmds9518/index.json",
    "bundleManifest": "/en/news/articles/2015/09/28/04/53/spmds9518/bundle-manifest.json"
  },
  "generatedAtUtc": "2026-09-27T11:10:23.644Z"
}