The deal devalued the U.S. dollar by 8.5 percent against gold, raising the price of an ounce of gold from $35 to $38. The other G10 countries have agreed to revalue their currencies against the U.S. dollar. President Nixon hailed the deal as “the most important monetary deal in the history of the world.” Fixed exchange rates: The United States convinced the G10 countries to reach an agreement in which they would maintain their dollar-linked exchange rates. The dollar, however, would not be tied to gold. So it was essentially a Bretton Woods agreement minus the gold hedge. In addition, certain freedoms have been granted to central banks, as the value of their currency can vary by 2.5% more or less of the value of the dollar before their central banks carry out open market operations. Many of the unshakable economic institutions we see today were formed as a result of the Bretton Woods agreement. Institutions such as the International Monetary Fund (IMF) and the World Bank were created as a result of this agreement. The Smithsonian Agreement was a temporary agreement negotiated in 1971 between the world`s top ten industrialized countries, namely Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom and the United States. The agreement made adjustments to the system of fixed exchange rates established under the Bretton Woods agreement and effectively created a new standard for the dollar, as other industrialized countries link their currencies to the United States dollar. President Nixon removed the world from the gold standard in 1971.

However, he expressed concern that free market operations in foreign exchange markets would bring difficulties and devaluations to many currencies. That`s why he convinced many countries to make a deal called the Smithsonian Agreement. This agreement had largely failed because it lasted less than a few years and resulted in the total suspension of the foreign exchange markets! The failure of the world`s governments to establish a system in which the exchange rates of currencies would be fixed and stable left no alternative to a market for currencies free of fluctuation. That is the phase we are in today. The forex market as we know it today is the result of the failure of the Bretton Woods and Smithsonian agreements. This provision seemed weak on paper. However, it collapsed under pressure from real-world markets. The U.S. trade deficit continued to rise, and as a result, the value of gold rose to $210 per ounce in 1972.

As a result, all members of the G-10 abandoned the Smithsonian agreement. This ended with the forex markets closing for a while! Please fill out this form, we will try to respond as quickly as possible. Although the Smithsonian agreement was hailed by President Nixon as a fundamental reorganization of international monetary affairs, he could not promote discipline from the Federal Reserve or the U.S. government. The price of the dollar on the free gold market continued to put pressure on its official price; and shortly after the announcement on 14 February 1973 of a 10% devaluation, Japan and the EEA countries decided to let their currencies fluctuate freely. A decade later, all industrialized countries had done the same. [4] [5] [6] The Bretton Woods Conference of 1944 established an international system of fixed exchange rates based on the gold standard, in which currencies were pedied to the U.S. dollar, convertible at US$35 per ounce into gold. . . .