to changes in the international monetary system. The most important of these changes was the transition in the 1970s from a system of fixed exchange rates-established in 1944 at an international monetary conference held in Bretton Woods, New Hampshire-to a system of flexible (or floating) exchange rates for the dollar in terms of other countries currencies. Under the Bretton Woods Agreements, which created the IMF and the International Bank for Reconstruction and Development (known informally as the World Bank), foreign authorities were responsible for intervening in exchange markets to maintain their countries exchange rates within 1 percent of their currencies parities with the US dollar; direct exchange market intervention by US authorities was extremely limited. Instead, US authorities were obliged to buy and sell dollars against gold to maintain the dollar price of gold near $ 35 per ounce. After the United States suspended the gold convertibility of the dollar in 1971, a regime of flexible exchange rates emerged; in 1973, under that regime, the United States began to intervene in exchange markets on a more significant scale. In 1978, the regime of flexible exchange rates was codified in an amendment to the IMF s Articles of Agreement. flexible exchange rates, the main aim of Federal Reserve foreign currency operations has been to counter disorderly conditions in exchange markets through the purchase or sale of foreign currencies (called foreign exchange intervention operations), primarily in the New York market. During some episodes of downward pressure on the foreign exchange value of the dollar, the Federal Reserve has purchased dollars (sold foreign currency) and has thereby absorbed some of the selling pressure on the dollar. Similarly, the Federal Reserve may sell dollars (purchase foreign currency) to counter upward pressure on the dollar s foreign exchange value. The Federal Reserve Bank of New York also executes transactions in the US foreign exchange market for foreign monetary authorities, using their funds. the early 1980s, the United States curtailed its official exchange market operations, although it remained ready to enter the market when necessary to counter disorderly conditions. In 1985, particularly after September, when representatives of the five major industrial countries reached the so-called Plaza Agreement on exchange rates, the United States began to use exchange market intervention as a policy instrument more frequently. Between 1985 and 1995, the Federal Reserve-sometimes in coordination with other central banks-intervened to counter dollar movements that were perceived as excessive. Based on an assessment of past experience with official intervention and a reluctance to let exchange rate issues be seen as a major focus of monetary policy, US ...
