Dollar Diplomacy

[Seth Ackerman]

I was hoping someone could elucidate an issue I've had a little trouble
understanding. In his new book, Peter Gowan argues that the U.S. has used
the international status of the dollar as an economic/diplomatic weapon, and
he occasionally mentions the demise of the Mitterand experiment as an
example: the U.S. kept the dollar high in order to sabotage French efforts
at reflation. 

But as far as I know, a country has only two ways to manage its exchange
rate: interest rates and forex market interventions. But interest rates are
controlled by the independent Fed, not the Treasury. So does that mean that
"Dollar Diplomacy" is conducted exclusively through open-market currency
purchases? Aren't there limits to the effectiveness of this tool? And does
that mean that such notable examples of exchange-rate management as the
Plaza agreement and the post-1995 high-dollar policy have been executed
exclusively through forex purchases?

Seth