There have been rumours that Fed Chair Janet Yellen’s recent dovish comments are somehow connected to a secret meeting to “take down” the dollar at the G-20 meeting.
Allegedly, global policymakers, including the US, Europe, Japan, China, and the International Monetary Fund, hashed out a secret deal at a secret side meeting at February’s G-20 meeting in Shanghai.
One key part of this so-called Shanghai Accord allegedly aimed at weakening the dollar.
The thinking behind this is that officials have been worried about the too strong dollar, which has put pressure on oil prices and China — and so they decided to knock it down.
The dollar’s recent weakness has fuelled the conspiracy-theory fire — especially when the US dollar index fell after Yellen’s decidedly dovish speech at the Economic Club of New York last Tuesday. The dollar index is down 3.7% since the G-20 meeting as of Monday, April 18.
However, in an interview with CNBC’s Sara Eisen, IMF managing director Christine Lagarde denied that there was any such secret agreement to choke the dollar.
“If there was such a thing, I wasn’t privy to that, and I doubt very much that there would be such an agreement,” she told Eisen.
“By the way, we slightly downgraded the US forecast precisely because of the impact of the strong US dollar on exports. And to the extent that the US dollar would sort of stabilise and not continue to appreciate, then certainly, the forecast might be a little bit better,” she added.
Notably, Bank of America Merrill Lynch’s (BAML) global economist, Ethan Harris, also expressed doubts about such a plot.
“This idea seems wrong to us in so many ways it is hard to know where to start,” he wrote in a note to clients in early April.
“There is a much simpler explanation for all of this. Central banks have turned more dovish because they are being hurt by common shocks: slower global growth and a risk-off trade in global capital markets,” he suggested.
The dollar index is 0.1% weaker at 94.61 as of 8:49 a.m. EST.