Competitive Exchange Rate Act of 1985

Competitive Exchange Rate Act of 1985 - Requires the President to create a temporary Commission on Exchange Rate Reform. Directs the Commission, within six months, to transmit to the President and the House and Senate Banking Committees a report proposing: (1) reforms of the international exchange rate system to correct exchange rate misalignments, restore a competitive exchange rate for the dollar, and achieve long-term stability in the exchange rate of the dollar and other currencies; (2) reforms in domestic economic policy to bring the dollar to more competitive levels; (3) mechanisms for better international coordination of fiscal, monetary, and savings and investment policies by the major industrialized nations; (4) an agenda for international negotiations on exchange rate reform; (5) criteria for coordinated intervention in foreign exchange markets by the major central banks; and (6) methods for calculating target values or ranges for major currencies.

Declares the achievement of a competitive exchange rate for the dollar to be a top priority in international trade negotiations.

Directs the President, as soon as practicable after the Commission submits its report, to seek to negotiate with other countries through an international conference in order to: (1) review the inadequacies of the existing international exchange rate system; (2) develop an agenda for reform of that system to provide for long-term exchange rate stability; and (3) review and implement proposals to coordinate macroeconomic policies among the major industrialized nations, achieve more stable U.S. trade and current account balances, and achieve long-term stability in the exchange rate of the dollar and other currencies.

Directs the Secretary of the Treasury to establish a Strategic Currency Reserve, within the Exchange Stabilization Fund, from the foreign currencies purchased through intervention in the exchange markets, to be used as part of a coordinated international strategy to achieve exchange rate equilibrium and a competitive exchange rate for the dollar. Directs the Secretary, in coordination with central banks of key countries, to purchase and sell foreign currencies from the Reserve at appropriate times to offset speculative movements of the dollar away from its competitive exchange rate or to assist the gradual movement of the dollar toward a competitive exchange rate.

Requires the Secretary to submit to the House Committee on Banking, Finance and Urban Affairs and the Senate Committee on Banking, Housing, and Urban Affairs a biannual report on: (1) the change in the exchange rate required to balance the U.S. merchandise trade account and the current account; (2) the effects on production, employment, and international competitive performance of U.S. manufacturing, agricultural, and mining industries when the dollar exceeds the exchange rate level consistent with either merchandise trade or current account balance; (3) the conditions that cause the exchange rate of the dollar to exceed levels consistent with current account balance and recommendations for changing U.S. economic policy to attain current account balance; (5) International Monetary Fund (IMF) recommendations for changes in U.S. policies and an explanation of the Secretary's plans to implement or ignore such recommendations; (6) progress by the Secretary and other Government officials in adjusting the value of the dollar to achieve current account balance and in reforming the international exchange rate system to reduce instability and disequilibrium in exchange rates; (7) the Secretary's objectives for domestic policies, intervention in exchange markets, and negotiations with other countries on exchange rate system reform and the reasons for any lack of progress in such negotiations; (8) the impact of currency transactions under this Act on foreign exchange markets; and (9) the extent to which the exchange rate of each country with which the United States has substantial bilateral trade competition or bilateral capital flows differs from that country's competitive exchange rate level and the trends and policies affecting that country's exchange rate and capital flows. Directs each Committee to report to its House on the Secretary's intended policies.

Directs the Secretary to transmit to the Congress all official U.S. documents submitted to the IMF in the course of any requested consultation with the United States and all IMF documents arising from that consultation.