Early in 1978 the dollar began to decline sharply in value in the foreign exchange markets. This dramatic decline precipitated several Federal Reserve policy actions, culminating in last November’s comprehensive dollar rescue effort undertaken in cooperation with the Treasury. The Fed removed the reserve requirements against eurodollar borrowing, intending to encourage the use of this source of funds in order to generate a net increase in the demand for the dollar and thereby increase its foreign exchange value. This paper examines analytically the conditions under which removal of these reserve requirements would improve the dollar’s foreign exchange value. Available data relating to eurodollar borrowing offer little evidence that this policy initiative has fulfilled its intentions.