(2vids)Crisis China quietly joins Asia’s currency wars to avert deflation & we all take 1 more step to complete total war!

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Crisis China quietly joins Asia’s currency wars to avert deflation & we all take 1 more step to complete total war!

Submitted by IWB

China quietly joins Asia’s currency wars to avert deflation

China is exposed like a sore thumb as countries devalue on all sides, from Russia, to Japan, Indonesia and Malaysia

China has for the first time warned openly about the excessive strength of the Chinese yuan, a sign that the country may be shifting its exchange rate policy as deflation takes hold and currencies slide across Asia.

Yi Gang, the deputy governor of the People’s Bank of China (PBOC), said the yuan’s rise had been “very fast” over the past year as it surges in tandem with the US dollar, making it the world’s second strongest currency.

China’s real effective exchange rate (REER) has risen for six months in a row, tightening the screws on struggling exporters with wafer-thin margins. It rose 2.3pc in trade-weighted terms in November alone as countries devalue on all sides, leaving China exposed like a sore thumb. The effect is to tighten China’s monetary conditions into the downturn.

The country has quietly joined Asia’s escalating currency wars, steering the yuan down by 2pc against the dollar since early November. This looks increasingly like a move to protect itself against Japan’s dramatic devaluation and against weakening currencies in Korea and other key Asian states.

The yuan is no longer fixed to the dollar but remains linked through a “soft peg”. It has therefore been forced sharply upwards this year even though the Chinese economy is slowing and the country is losing global competiveness.

http://www.telegraph.co.uk/finance/economics/11309243/China-quietly-joins-Asias-currency-wars-to-avert-deflation.html

http://youtu.be/JpSUyIPajhA

from Wikipedia:

Currency war in 2013[edit]

In mid January 2013, Japan’s central bank signaled the intention to launch an open ended bond buying programme which would likely devalue the yen. This resulted in short lived but intense period of alarm about the risk of a possible fresh round of currency war.

Numerous senior central bankers and finance ministers issued public warnings, the first being Alexei Ulyukayev, the first deputy chairman at Russia’s central bank. He was later joined by many others includingBahk Jae-wan, the finance minister for South Korea, and by Jens Weidmann, president of the Bundesbank. Weidmann held the view that interventions during the 2009–11 period were not intense enough to count as competitive devaluation, but that a genuine currency war is now a real possibility.[78] Japan’s economy minister Akira Amari has said that the Bank of Japan’s bond buying programme is intended to combat deflation, and not to weaken the yen.[79]

In early February, ECB president Mario Draghi agreed that expansionary monetary policy like QE have not been undertaken to deliberately cause devaluation. Draghi’s statement did however hint that the ECB may take action if the Euro continues to appreciate, and this saw the value of the European currency fall considerably.[80] A mid February statement from the G7 affirmed the advanced economies commitment to avoid currency war. It was initially read by the markets as an endorsement of Japan’s actions, though later clarification suggested the US would like Japan to tone down some of its language, specifically by not linking policies like QE to an expressed desire to devalue the Yen.[81] Most commentators have asserted that if a new round of competitive devaluation occurs it would be harmful for the global economy. However some analysts have stated that Japan’s planned actions could be in the long term interests of the rest of the world; just as he did for the 2010–11 incident, economist Barry Eichengreen has suggested that even if many other countries start intervening against their currencies it could boost growth world-wide, as the effects would be similar to semi-coordinated global monetary expansion. Other analysts have expressed skepticism about the risk of a war breaking out, with Marc Chandler, chief currency strategist at Brown Brothers Harriman, advising that: “A real currency war remains a remote possibility.” [82] [83] [84][85]

On 15 February, a statement issued from the G20 meeting of finance ministers and central bank governors in Moscow affirmed that Japan would not face high level international criticism for its planned monetary policy. In a remark endorsed by US Fed chairman Ben Bernanke, the IMF’s managing director Christine Lagarde said that recent concerns about a possible currency war had been “overblown”.[86]Paul Krugman has echoed Eichengreen’s view that central bank’s unconventional monetary policy is best understood as a shared concern to boost growth, not as currency war. Goldman Sachs strategist Kamakshya Trivedi has suggested that rising stock markets imply that market players generally agree that central bank’s actions are best understood as monetary easing and not as competitive devaluation. Other analysts have however continued to assert that ongoing tensions over currency valuation remain, with currency war and even trade war still a significant risk. Central bank officials ranging from New Zealand and Switzerland to China have made fresh statements about possible further interventions against their currencies.[87][88][89][90]

Analyses has been published by currency strategists at RBS, scoring countries on their potential to undertake intervention, measuring their relative intention to weaken their currency and their capacity to do so. Ratings are based on the openness of a country’s economy, export growth and real effective exchange rate (REER) valuation, as well as the scope a country has to weaken its currency without damaging its economy. As of January 2013, Indonesia, Thailand, Malaysia, Chile and Sweden are the most willing and able to intervene, while the UK and New Zealand are among the least.[91]

From March 2013, concerns over further currency war diminished, though in November several journalists and analysts warned of a possible fresh outbreak. The likely principal source of tension appeared to shift once again, this time not being the U.S. versus China or the Eurozone versus Japan, but the U.S. versus Germany. In late October U.S. treasury officials had criticized Germany for running an excessively large current account surplus, thus acting as a drag on the global economy.[92] [93]

Currency war in 2014[edit]

Since September 2014, several journalists, commentators and financial sector insiders have again raised the prospect of further currency war. This time, rather than being intended as a means to boost competitiveness, some states, especially Japan and the Eurozone, may be motivated to devalue their currencies as a means to counter the threat of deflation. ECB President Mario Draghi has however denied any intent to engage in competitive devaluation.[94] [95] [96]….more here

 

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