On January 4, 1978 the Treasury and the Federal Reserve System, in conjunction with the Exchange Stabilization Fund, announced that they would intervene in foreign exchange markets to prevent a speculative decline in the international value of the U.S. dollar. This announcement has been happily received by European and Japanese central banks and has elicited lively discussion in the news media. The stated purpose of intervention is to eliminate “speculative” swings in the value of the dollar. But it is also clear that if such speculation has indeed affected the value of the dollar, it has been unidirectional for the past nine months as the international value of the dollar has been declining steadily and, at times, precipitously.