What can the U.S. Government do if it wanted to control the fluctuations in the exchange rate of the dollar?

Answer 1

Raise or lower interest rates.
Decrease/increase production of the dollar.
Issue/buy foreign debt bonds
Increase/Decrease GDP

Answer 2

The US government can't do a darn thing. They gave that power to the Federal Reserve (a private institution) way back in 1913. The Federal Reserve can only do 2 things 1) it can set interest rates 2) it can create more money to lend out of thin air

When they raise interest rates the dollar goes up because more Treasury Bonds are sold. This also slows the economy down because it costs individuals and small businesses more to borrow. When they create more money they basically just loan it to the US Government which we pay the interest on with our income tax. This puts more money into the system and devalues that dollar by increasing the supply.

Its the perfect scam.

Answer 3

It can completely ignore the doctrine of free trade. The fluctuation in the dollar exchange rate is a measure of how well we are doing versus other countries. The only way to set it in place would be for Uncle Sam to arbitrarily select values. This would only apply to American banks and would cause us to lose a lot of export/import business and many others would would quickly find ways to exploit it. The honest exchange rate is definitely a good thing.