Forex traders convinced themselves last week that another Plaza Accord is in the offing. That 1985 agreement, arranged in the luxurious Plaza Hotel in New York, led to

co-ordinated currency interventions that weakened the dollar, particularly against the yen. (Less helpfully, it also whipped up the Japanese asset bubble.) This time the aim would be to strengthen China’s renminbi. The purported deal is for Beijing to agree to a faster rate of appreciation in return for a less expansionist monetary policy from Washington.

There is some evidence a sensible arrangement of this sort is in the works. China seems to be responding to US rhetoric; its currency has gained 2.4 per cent against the dollar since September 7, after months of almost no movement. The Federal Reserve has not made any corresponding gesture of monetary toughness but it has shown its power over the dollar. It has fallen