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The reason for the increase in exchange rate volatility was the breakdown of the so-called Bretton Woods accord. Under the Bretton Woods system, exchange rates were fixed for the most part and significant changes occurred only rarely. As a result, importers and exporters could predict with relative certainty what exchange rates were likely to be in the future. In today's post-Bretton Woods era, exchange rates are set by market forces, and future exchange rates are very difficult to predict with precision.

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