Currency interventions don’t always go according to plan. The 1985 Plaza Accord — the canonical example of international currency co-ordination — succeeded in weakening an overvalued dollar. But it may have been too successful: the dollar wouldn’t stop falling.

By the time the G6 countries met in Paris in 1987, the aim was to stop the slide. But domestic priorities had started to diverge and the interest in co-ordination was fading. The Louvre Accord unraveled within a year.

Plaza’s success is often attributed to the credibility of a rare multilateral agreement. But whether a country intervenes on its own or with help from its friends matters less than whether it aligns with macroeconomic fundamentals. The dollar’s overvaluation reflected high US interest rates after the Volcker shock and a large fiscal deficit that attracted foreign capital.

By early 1985, US interest rates started to look less exceptional. Against the yen, the dollar had already peaked about seven months before Plaza. Plaza accelerated a trend that was already under way.

Unilateral interventions can be just as effective when they are credible. The Swiss National Bank’s commitment to cap the Swiss franc in 2011 worked because markets believed it would print as many francs as necessary to defend the exchange rate. In the UK in 1992, by contrast, Black Wednesday was an unmitigated disaster because investors doubted the Bank of England could keep interest rates high enough to defend an overvalued pound.

We’re just one week on from the announcement of the joint US-Japan intervention to prop up a weakening yen. The initial move has been encouraging, but durability is the real test. Interventions can buy policymakers time, but they can’t fix a macro backdrop that is pointing towards higher interest rates.