Posts

Has China Quietly Joined the Currency War?

/1 Comment/in , /by

Photo Credit: Getty ImagesChina has been less vocal than other major economies in recent weeks in voicing discontent about a sharp slide in the yen, which means stronger currencies elsewhere. Yet, Beijing is taking action of its own to head off unwanted pressure on the yuan to appreciate.

The Chinese yuan, also known as the renminbi, fell on Thursday to its weakest level since late December. In fact, the yuan has been creeping down since January 14, when it hit a record high against the U.S. dollar at about 6.21, as China’s central bank steps up its intervention in the foreign exchange markets to curb yuan appreciation.

“It is disappointing for anyone looking for yuan gains,” said Sean Callow, senior currency strategist at Westpac Bank in Sydney. “The leash on the yuan has been tightening, probably because of the decline in the yen and also the decline in the (South Korean) won and the Taiwan dollar and in that environment it’s tough for China to allow currency gains that would hurt its competitive edge.”

The yen has tumbled against all major currencies since the start of the year, falling roughly 10 percent against the dollar and the euro, amid growing expectations of aggressive monetary policy from Japan, now on a concerted bid to revive a weak economy and end years of deflation.

The won meanwhile has eased about 2.5 percent against the dollar since the start of 2013, while the Taiwan dollar is down about 2 percent.

Read more from this story HERE.

Are We on the Verge of a Currency War?

/2 Comments/in , /by

Despite global finance ministers promising in 2010 that they wouldn’t engage in “competitive devaluation,” it looks like the world is on the brink of a major currency war, or so says Alexei Ulyukayev, first deputy chairman of Russia’s central bank, according to Bloomberg.

“Japan is weakening the yen and other countries may follow,” Ulyukayev warned today at a conference in Moscow, adding later that the world is headed for a “currency war.”

Unfortunately, Ulyukayev isn’t the only one with currency concerns. Others have weighed in on the issue :
•Luxembourg Prime Minister Jean-Claude Juncker recently noted the “dangerously high” value of the euro.
•Norway and Sweden have expressed concern over currencies exchange-rates.
•The Bank of Korea has threatened “an active response” to current rates.
•Federal Reserve Bank of St. Louis President James Bullard said he’s “a little disturbed” by Japan’s actions and the risk of so-called “beggar-thy-neighbor” policies.
•Bank of England Governor Mervyn King said last week that he is worried “we’ll see the growth of actively managed exchange rates.”

In short, there’s a “degree of disquiet in the global policy-making community,” as Reserve Bank of Australia Governor Glenn Stevens puts it, and some think it could evolve into something far more dangerous for the world economy.

Read more from this story HERE.