USD: Lots of mini Mar-a-Lago Accords? - Commerzbank

When news agencies yesterday announced that officials from the South Korean Ministry of Finance and the US Treasury Department had discussed exchange rates on the sidelines of a meeting in Milan, Korea's currency, the won, took a big leap. But it wasn't the only one. The US currency came under pressure across the board, Commerzbank's Head of FX and Commodity Research Ulrich Leuchtmann notes.

USD comes under pressures across the board

"Now, it's not really unusual for officials from friendly finance ministries to exchange ideas. Especially when both officials are responsible for international relations in their respective ministries. I assume that's part of their job description. Nevertheless, this news gained relevance because there have been discussions for some time about a 'Mar-a-Lago Accord,' i.e., a scenario of international political coordination with the aim of weakening the US currency."

"But it can also be achieved with a sufficient number of bilateral agreements. One with South Korea, one with Japan, and so on. Now, it is by no means plausible that these countries want to revalue their own currencies against the dollar. But it is easier - at least from the perspective of the US president and his 'neorealist' advisors - to force them to do so one by one."

"In short, US representatives should not be talking to officials from foreign finance ministries, but to representatives of foreign central banks (at least where central banks are independent). To put it bluntly, if Plaza worked, it was because the heads of the G5 central banks were involved. Not because of the finance ministers we all remember from the press photo."