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. Bretton Woods Agreement

    A landmark system for monetary and exchange rate management established ...
  4. Crawling Peg

    A system of exchange rate adjustment in which a currency with ...
  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 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. Insurance

    Top 9 Vacation Destinations For Wall Street Geeks

    Indulge your inner geek with one of these financial-themed holiday getaways.
  7. 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.
  8. Forex Education

    Why China's Currency Tangos With The USD

    Investopedia explains: It takes two to tango, but unless both partners move in perfect cohesion, a sequence of graceful maneuvers can be reduced to a series of clumsy moves. The latter depiction ...
  9. Economics

    How Currency Works

    Currency offers key advantages over economies based on direct trade. It provides sellers with a broader market for their goods and services, and provides a durable asset with which people can ...
  10. Forex Education

    Why It's Important To Regulate Foreign Exchange

    In an increasingly globalized economy, the significance of the foreign exchange marketplace cannot be underestimated.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center