Currency Wars Have Begun?

Aussiejeff · 4 August 2011

First, the Swiss government, now the Japanese. ..

Japan followed Switzerland in intervening in the foreign-exchange market in an effort to stem an appreciating exchange rate that threatened to damage export competitiveness.

Japan acted alone in the market, while officials were in contact with other nations, Finance Minister Yoshihiko Noda told reporters in Tokyo today. He also suggested that the central bank may follow with monetary stimulus, saying that he hoped the Bank of Japan would take appropriate action. The BOJ separately brought forward by a day the end of its scheduled policy meeting.

Switzerland is also contending with a surge in its foreign- exchange rate, unexpectedly cutting interest rates and pledging to boost the supply of the franc yesterday. Both currencies, of nations with current-account surpluses, have advanced as investors sought a haven from the euro-region debt crisis and a deteriorating U.S. economy.

http://www.bloomberg.com/news/2011-...ervening-to-stem-currency-s-appreciation.html

Brazil next on the warpath??

Brazilian Finance Minister Guido Mantega warned Sunday that Brazil could not afford to be left behind in a global game of currency manipulation for competitive advantage.

“The whole world is fighting for markets out there, and one way to do that is with currency manipulation, by depreciating currency. We cannot be left behind in this game,” he said in an interview with O Estado de Sao Paulo.

http://www.turkishweekly.net/news/120647/brazil-does-not-step-back-in-currency-war.html

There have been currency skirmishes since GFC I, but could these "unexpected" moves by sovereign states without international consultation (and surely a whole lot more of "revenge" devaluations yet to come by those countries already at breaking point) be the tipping point for GFC MkII proper????

What hope for the Lil' Ozzie Bleeder, eh? How will a much lower Yen (and presumably a much lower Brazilian Real in the near future) affect our terms of trade etc?

*sigh*

tech/a · 4 August 2011

Let me see.
Lower interest rates
Stabilised property market.
Not all doom and gloom.

Uncle Festivus · 18 January 2013

The race to the bottom has entered a new era?

Europe drawn into global currency wars as slump deepens.

The world is edging closer to all out currency conflict as Europe’s politicians join a chorus of policy-makers across the globe pushing for devaluations to fight for market share.

Jean-Claude Juncker, EuroGroup chief, has signalled that Europe is no longer willing to be the last economic player holding the toxic parcel of an over-valued exchange rate, describing the euro as “dangerously high” after its three-month surge against the dollar, yuan and yen.

The comments follow warnings by two French ministers this month that the strong euro is holding back efforts to pull the France out of deep industrial slump.

Alexei Ulyukayev, deputy head of Russia’s central bank, said the tilt in EMU policy marks a new escalation as every major bloc of the global economy tries to drive down its exchange rate at the same time. “We are now on the threshold of very serious currency wars,” he said.

http://www.telegraph.co.uk/finance/financialcrisis/9807092/Europe-drawn-into-global-currency-wars-as-slump-deepens.html

Meanwhile in 'Level Playing Field' and 'Free Trading' nirvana Australia, the RBA stands pat as Australians lose their jobs and industry to the better currency manipulators?

The AUD/USD is killing us!

notting · 18 January 2013

EuroGroup chief, has signalled that Europe is no longer willing to be the last economic player holding the toxic parcel of an over-valued exchange rate

Should have said and acted on that 10 years ago!!

Uncle Festivus · 18 January 2013

Yes, I think the term 'Toxic Parcel' is rather appropriate for fiat currency, no matter who's currency it is? China can't get rid of USD's fast enough, to our benefit?

prawn_86 · 18 January 2013

Uncle Festivus said:
Meanwhile in 'Level Playing Field' and 'Free Trading' nirvana Australia, the RBA stands pat as Australians lose their jobs and industry to the better currency manipulators?

The AUD/USD is killing us!

Any attempt by the RBA to manipulate/print AUD would just be laughed at by the rest of the World due to the size of our economy

McLovin · 18 January 2013

prawn_86 said:
Any attempt by the RBA to manipulate/print AUD would just be laughed at by the rest of the World due to the size of our economy

Isn't it all relative?

prawn_86 · 18 January 2013

McLovin said:
Isn't it all relative?

Yes but to devalue the dollar we would need to print at a greater rate then other countries wouldnt we? Mass inflation would probably be an issue with the amount we would need to print.

I could be wrong, macro-econ and money supply isnt my strong point

sydboy007 · 18 January 2013

prawn_86 said:
Yes but to devalue the dollar we would need to print at a greater rate then other countries wouldnt we? Mass inflation would probably be an issue with the amount we would need to print.

I could be wrong, macro-econ and money supply isnt my strong point

Could copy the Chinese to degree. They were able to steralise a lot of the excess yuan by forcing the banks to hold up to 20% capital reserves - the megabank 4 are around the 8-9% mark.

You do rip off your people by pushing the currency below its true value though. The Chinese people have been ripped of by trillions of dollars with the manipulation of their currency.

It will be interesting to see what happens though 2013. To keep a currency lower you need to be buying other countries currencies. At what point would central banks block other central banks from buying their currency? Might work if you run a CAS, but if you require funding then it would be hard to tell your creditors to stop it.

tinhat · 18 January 2013

McLovin said:
Isn't it all relative?

Australian GDP as a percentage of global GDP 1.2% (ranking, 12).
AUD trades as a percentage of global currency trades 7.6% (ranking, 5)*

This figure is from 2010.

Sources:
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)
http://en.wikipedia.org/wiki/Template:Most_traded_currencies#cite_note-BIS-1

sydboy007 · 18 January 2013

about time we brought in a 0.3% tax on money coming into the country to be refunded if the funds stay for a minimum of 12 months. Should help to tame the speculators without really causing too much harm to the funds we need. if 3 basis points is the difference between yes and no for an investment then it was already marginal at best.

Should be a nice earner for the Govt. along the lines of the bank funding guarantees they made. 1.5B profit from that.

FlyingFox · 18 January 2013

sydboy007 said:
about time we brought in a 0.3% tax on money coming into the country to be refunded if the funds stay for a minimum of 12 months. Should help to tame the speculators without really causing too much harm to the funds we need. if 3 basis points is the difference between yes and no for an investment then it was already marginal at best.

Should be a nice earner for the Govt. along the lines of the bank funding guarantees they made. 1.5B profit from that.

The real speculators don't need to transfer any money at all. All you would be doing is stopping short term flows in general and preventing investments.

I wonder how many of the big investment banks have shorted the Oz and how many people will becomes the next George Soros when the currency does eventually go under?

prawn_86 · 18 January 2013

FlyingFox said:
I wonder how many of the big investment banks have shorted the Oz and how many people will becomes the next George Soros when the currency does eventually go under?

Maybe you with some options

The AUD will eventually fall, but i think it will be more an impact of a worsening economy as opposed to strength overseas

explod · 18 January 2013

prawn_86 said:
Maybe you with some options

The AUD will eventually fall,

Why?

When debt to GDP is so bad in most of the western world I cannot see this. If we look sideways we are in fact, compared to most other countries, reasonably self contained.

We can feed and shelter ourselves and in the financial crisis that seems to be looming,that is going to count for a great deal IMO.

FlyingFox · 18 January 2013

explod said:
Why?

When debt to GDP is so bad in most of the western world I cannot see this. If we look sideways we are in fact, compared to most other countries, reasonably self contained.

Please, lets not kid ourselves. If it weren't for mining we would be in **** right now.

Because we live in a global world, we are always going to be exposed to global competition and currencies. The fact that I can easily get goods of services cheaply from somewhere else will always mean that local economy will be under pressure. And in Australia's case, we are so uncompetitive that even if the dollar came back to say 80c, most of our industries could not be saved.

explod said:
We can feed and shelter ourselves and in the financial crisis that seems to be looming,that is going to count for a great deal IMO.

For now......

Edit: and plus what prawn_86 said later on

FlyingFox · 18 January 2013

prawn_86 said:
Maybe you with some options

Always the astute businessman ... I haven't forgotten.....

Trembling Hand · 18 January 2013

sydboy007 said:
about time we brought in a 0.3% tax on money coming into the country to be refunded if the funds stay for a minimum of 12 months. Should help to tame the speculators without really causing too much harm to the funds we need. if 3 basis points is the difference between yes and no for an investment then it was already marginal at best.

Should be a nice earner for the Govt. along the lines of the bank funding guarantees they made. 1.5B profit from that.

Wouldn't work. You don't need to buy and sell the actual currency to move the currency.

prawn_86 · 18 January 2013

explod said:
Why?

When debt to GDP is so bad in most of the western world I cannot see this. If we look sideways we are in fact, compared to most other countries, reasonably self contained.

We can feed and shelter ourselves and in the financial crisis that seems to be looming,that is going to count for a great deal IMO.

Because when financially everything does hit the fan where do you think all the money will be flowing? Certainly not investment into the AUD. People will be taking the funds home to their respective countries if they are required to sell investments.

I dont disagree with your other points, simply the flow of money in another financial crisis will be away from the AUD

burglar · 18 January 2013

FlyingFox said:
... we are so uncompetitive that even if the dollar came back to say 80c, most of our industries could not be saved. ...

We can export wine to US of A, if the dollar came back to say 80c,

FlyingFox · 18 January 2013

burglar said:
We can export wine to US of A, if the dollar came back to say 80c,

Agreed.... But when wages are some of the highest in the world and under constant inflationary pressure it is difficult to see a way to be competitive.

Currency Wars Have Begun?

Aussiejeff

tech/a

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Uncle Festivus

notting

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prawn_86

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