Dollar Devalued 10 Per Cent; Japan Decides to Float Yen

The United States last night devalued the dollar by 10 per cent in an effort to solve the international monetary crisis. It was the second dollar devaluation in little over a year.

Treasury Secretary George P. Shultz told newsmen at a late night news conference that he hopes the move will end the crisis that has rocked European financial markets for the past two weeks.

In addition, Shultz said, Japan has decided to float its yen, thus tearing it away from its fixed exchange rate with the dollar.

Shultz also announced that the United States will phase out by the end of 1974 its controls on the export of U.S. capital. He said that the devaluation and the other moves taken by the Nixon administration will benefit "the American working man, businessman and the consumer."

A dollar devaluation has the effect of making imports into the United States more expensive and U.S. exports to other countries cheaper, thus giving the nation a better trading advantage.

Shultz said other nations may make changes in the values of their currencies after announcement of the American devaluation. Such currency changes would have to be announced by the countries involved.

But he said it is likely that countries with floating currencies, such as Canada and Great Britain, will continue with the float.

As for the Japanese currency, the secretary said, the United States expects the yen will rise in value against the dollar over the 10 per cent change.

Shultz said the crisis should make other nations realize that speedy reform of the world monetary system is necessary.

Slow Progress

"Progress in the work of reform has been too slow and should move with a greater sense of urgency," Shultz said.

The United States is not obliged to intervene in foreign exchange markets to support the value of the dollar as it has been doing in recent weeks.

The capital controls being phased out include the interest-equalization tax and money controls on direct foreign investments. Also, the Federal Reserve Board plans to end a voluntary program to restrain foreign credit.

The dollar has been falling in value in recent days, prompting most of the world's major money markets to close Monday. As a result of the slippage, Americans traveling abroad found their dollar wasn't buying as much as before.

Monetary experts from the big Western nations had been searching for ways to halt the crisis. They were talking in terms of seeing the West German mark and the Japanese yen revalued upward.