MINI-CASE The 11.5. Dollar Sells 035' On September 3, 2003, the nance ministers of the Group of Seven (G-7) industrialized countries endorsed "exibility" in exchange rates, a code word widely regarded as an encouragement for China and Japan to stop managing their currencies.10 Both countries had been actively intervening in the foreign exchange market to weaken their currencies against the dollar and thereby improve their exports. China and Japan had been seen buy- ing billions of dollars in U.S. Treasury bonds. The G-7 statement prompted massive selling of the U.S. dollar and dollar as sets. The dollar fell 2% against the yen, the biggest one-day drop that year, and U.S. Treasury bonds saw a steep decline in value as well. G-7 1 US, 2 Canada, 3 UK, 4 Germany, 5 France, 6 Italy, 7 Japan. 1. How did China and Japan manage to weaken their currencies against the dollar? 2. Why did the U.S. dollar and U.S. Treasury bonds fall in response to the G-7 statement? 3. What is the link between currency intervention and China and Japan buying U.S. Treasury bonds? 4. What risks do China and Japan face from their currency intervention