Tug Of War For Currencies

With many countries attempting competitive devaluation at the moment, the tug of war between currencies is being played out on a global scale on the eternal premise that if one currency goes up in value, another must come down; as is the nature of ‘valuation’ in the global markets.

Because of this nature, by definition, no two currencies can move in the same direction. One’s gain is another’s loss.

These changes are being fortified and artificially exaggerated by countries such as China and Japan interfering with their own currencies in order to counter-act inflation in the market. They do this by effectively buying and then selling their own currencies to generate currency movements that would otherwise have been different.

Such interference has generated an enormous amount of tension between countries (those who condone the practice, and those that do not) and the situation has been ominously labelled the ‘new currency wars.’

Two countries in the limelight at the moment are the US and China who have been publicly opposing each other at a host of financial conferences and crisis talks. The US is voicing concerns over China’s interference in it’s Yuan (otherwise known as the Renminbi) which it terms as currency manipulation.

In response to this, China has branded the US as using them as a scapegoat for their own economic problems which include a sluggish economy fuelled by high unemployment.

As more and more countries jump on the intervening band-wagon, we are seeing countries such as Brazil, Japan and Korea becoming involved in the global tug of war, as temperatures continue to rise.

Explore posts in the same categories: Economy, Japan, USA

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