What was the impact of the Smithsonian Agreement?

The Smithsonian Agreement, reached in December 1971, significantly impacted the international financial landscape by establishing fixed exchange rates among major currencies without relying on gold or silver as backing. This agreement followed the collapse of the Bretton Woods system, which pegged currencies to the U.S. dollar, which in turn was convertible to gold.

With the Smithsonian Agreement, the major developed countries agreed to adjust their exchange rates, essentially shifting to a new system of fixed exchange rates that weren't based on precious metals. This allowed countries to manage their currency value while also accommodating international trade and investment in a more flexible manner.

In contrast, the other options do not accurately reflect the agreement's influence. The euro was introduced much later in the 1990s, detailed adjustments within the Smithsonian Agreement represented a specific framework rather than an entirely free-floating currency exchange system, and currency convertibility was a separate issue addressed in later agreements, not directly facilitated by the Smithsonian Agreement itself.