February 25, 2013

While people fret about a potential shooting war between three of the world’s largest economies in the East China Sea, the real danger may be a currency war in which all three countries will be key players.

Talks of a race by countries to devalue their currencies a la 1930s may be overblown, but the alarming drop in the value of the Japanese yen – a fall of almost 20 per cent against the US dollar since November – has revived fears among its export-reliant neighbours, including China.

This was what prompted the G7 group of industrialised nations and the G20 – in which the emerging market powerhouses are better represented – to both declare their member states would not target exchange rates for competitive purposes and risk a currency war. But promises are not the same as concrete policy co-ordination, the lack of which has left markets feeling uneasy as it was before their meetings.

Read more

Our Christmas in July sale is now live! Get double Patriot Points and free shipping on our hottest products!

Related Articles