Smithsonian Agreement

AAA

DEFINITION of 'Smithsonian Agreement '

An agreement reached by a group of 10 countries (G10) in 1971 that effectively ended the fixed exchange rate system established under the Bretton Woods Agreement. The Smithsonian Agreement reestablished an international system of fixed exchange rates without the backing of silver or gold, and allowed for the devaluation of the U.S. dollar. This agreement was the first time in which currency exchange rates were negotiated.

INVESTOPEDIA EXPLAINS 'Smithsonian Agreement '

The Smithsonian Agreement led to an approximately 8% devaluation of the U.S. dollar, and raised the price of gold from $35 to $38. The agreement was praised by then-U.S. President Richard Nixon as "the most significant monetary agreement in world history." However, the par value system began to lose its popularity in 1972-1975, and economic forces compelled several countries to switch.

RELATED TERMS
  1. Dual Exchange Rate

    A situation in which there is a fixed official exchange rate ...
  2. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by ...
  3. Crawling Peg

    A system of exchange rate adjustment in which a currency with ...
  4. Bretton Woods Agreement

    A landmark system for monetary and exchange rate management established ...
  5. French Franc - F

    A currency used in France, prior to the introduction of the euro. ...
  6. CFA Franc

    One of two African regional currencies backed by the French treasury, ...
RELATED FAQS
  1. When and why did the euro make its debut as a currency?

    On January 1, 1999, the European Union introduced its new currency, the euro. Originally, the euro was an overarching currency ... Read Full Answer >>
  2. Is there a world currency? If so, what is it?

    T here is no such thing as a world currency. However, since World War II, the dominant or reserve currency of the world has ... Read Full Answer >>
  3. What was "Operation Wooden Nickel"?

    On November 19, 2003, the Commodity Futures Trading Commission (CFTC) and the FBI announced the completion of an 18-month ... Read Full Answer >>
Related Articles
  1. Investing

    Earnings: Quality Means Everything

    It's quantity that generates all the hype, but there are more meaningful factors that gauge true performance.
  2. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  3. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  4. Personal Finance

    The Currency Board: Understanding The Government's Bank

    Currency board, central bank - what's the difference? Find out more about this little-known monetary authority.
  5. Forex Education

    Dual And Multiple Exchange Rates 101

    Why would a country choose to implement dual or multiple exchange rates? It's risky, but it can work.
  6. Forex Education

    What Are IMF Special Drawing Rights?

    Technically, the SDR is neither a currency, nor a claim on the IMF itself.
  7. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
  8. Forex

    Understanding Currency Carry Trade

    A currency carry trade is a long-term investment strategy used primarily by large institutional investors. The purpose is to make a profit over time from differences in interest rates between ...
  9. Insurance

    Top 9 Vacation Destinations For Wall Street Geeks

    Indulge your inner geek with one of these financial-themed holiday getaways.
  10. Forex News

    How The Forex "Fix" May Be Rigged

    When it comes to forex, some types of "fixes" are legal. But some really aren't.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center