Is a ‘Bessent doctrine’ taking shape in global FX policy?

A potential "Bessent doctrine" may be emerging in global foreign exchange policy, according to Citi Research. Treasury Secretary Scott Bessent's efforts to address imbalances through interventions have been compared to the 1985 Plaza Accord. While Citi does not confirm a major shift, the coordinated U.S.-Japan intervention to support the yen, using Treasury foreign-currency assets in the Exchange Stabilization Fund (ESF), is seen as a sign of change.

The U.S. Treasury's use of existing ESF assets, including euros, rather than extending credit, was confirmed by Bessent. While JPY weakness may be challenging to correct through this approach, the possibility of other European nations joining the framework to pressure China to reverse CNY depreciation cannot be ruled out. Citi Research highlights the new "national economic policy" proposed by Secretary Bessent, known as the "Bessent doctrine," which emphasizes economic security, mutual free trade, and greater benefits to U.S. workers.

Despite the interventions, the U.S. dollar is not expected to weaken, but a "mini-accord" between the U.S. and Japan could potentially lead to additional actions involving other nations in the future. The focus will likely remain on the Chinese current account and the CNY problem.