The medium-term currency outlook

The article examines the experience of the major international currencies over the period since 1953 and assesses their prospects in the early 1980s. It summarizes the historical background, drawing a distinction between the Bretton Woods arrangement, when the world operated under a notional fixed exchange rate system, and the post 1971 experience which has involved a good deal of ‘dirty floating’ in the absence of any formal system. The paper focuses on the factors which influence exchange rate movements, and examines the practical uses of the analytical tools available, assessing the value, and possible misuse, of exchange rate forecasts in the decision-making process of the Long Range Planner. The author draws certain conclusions about economic policy and the international monetary system and offers some thoughts about the implications of the European Monetary System.