Citi weighs 'Bessent doctrine' in global FX policy shift
Digital FinanceMacro
Citi Research is questioning whether global currency policy is undergoing a major shift akin to the 1985 Plaza Accord, as Treasury Secretary Scott Bessent works to address imbalances through controversial interventions. While Citi sees no confirmation of a structural turning point, it notes that the U.S.-Japan currency alliance to reverse yen weakness could signal a change in global policy. In late July, the U.S. Treasury joined Japan in a coordinated intervention to support the yen after USD/JPY neared a 40-year high around ¥164 per dollar, using existing Exchange Stabilization Fund assets, reportedly including euros. Citi suggests that if yen weakness reversal contributes to a correction in yuan weakness, European nations might join the U.S. to demand China reverse yuan depreciation, though it doubts yen weakness can be easily corrected given its link to stock-market-driven yen-selling hedges. The interventions align with Bessent's proposed 'national economic policy'—dubbed the 'Bessent doctrine'—which shares with the Mar-a-Lago accord the goal of rectifying global imbalances, but Citi says they do not imply a weaker dollar, and future actions could involve other nations, likely focusing on China's current account and the yuan.
