Currency Wars Heat Up Again, It’s A Race To The Bottom

Posted by: : Paul EbelingPosted on: May 21, 2014 Currency Wars Heat Up Again, It's A Race To The Bottom

Currency Wars Heat Up Again, It’s A Race To The Bottom

The G-20 finance ministers agreed to end their currency wars about a year ago, but once again competitive devaluations are in vogue 

European Central Bank (ECB) President Mario Draghi called the Euro’s strength a “serious concern” last week, and officials in Australia, Canada and New Zealand are making noise about weakening their currencies in here

In Q-1 China moved strongly to push down its RMB Yuan during, spending an $100-B + in direct intervention. Other emerging market governments are fighting off currency strength too, including India, Brazil and South Korea, according to the data.

The Buck’s weakness along with the US Federal Reserve’s determination to keep short-term interest rates at near Zero has put upward pressure on other currencies, tensions are on the rise. 

Central banks in developed nations are sending clear messages that they will design monetary policy to weaken their currency. At the same time, central banks in emerging markets are concerned about being caught in the “crossfire.”

Note: governments move to weaken their currencies because that boosts their countries’ exports by making them less expensive in foreign currencies. A weaker currency also can help stave off disinflation/deflation by raising import prices.

The world is on the verge of a currency war, it will be a race to the bottom.

Stay tuned…

HeffX-LTN 

Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.
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