Is A Post-Covid-19 Currency War Coming

U.S. dollar, euro and Swiss franc bank notes are seen in a bank in Budapest August 8, 2011. REUTERS/Bernadett Szabo 

Marc Jones and Elizabeth Howcroft, Reuters: Analysis: Is a post-COVID currency war coming?

LONDON (Reuters) - Financial markets’ euphoric reaction to the recent COVID-19 vaccine breakthroughs and U.S. election results is pushing some currencies up so fast that rumblings have begun about a potential new FX war. 

Almost a decade after Brazil’s finance minister likened Western central bank money-printing to economic warfare, some of the conditions that led countries to weaken their currencies then look to be forming again. 

Investors’ growing eagerness to buy into risky assets gave emerging market currencies their best month in nearly two years in November, stretching a run of gains that started in June. A further extension -- seen as likely after the dollar hit a two-year low on Thursday -- would mark be their longest uninterrupted climb since 2012. 

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WNU Editor: Common sense currency policy is now an after-thought in most countries around the world. A currency war is coming. Probably sooner rather than later.

Will China Dump Its $1.1 Trillion In US Treasuries?

China has allowed the yuan to depreciate so that 1 US dollar buys more than 7 yuan. (REUTERS: Thomas White)

Julia Horowitz, CNN Business: China has a $1 trillion trade war weapon. Will it ever use it?

London (CNN Business)In the US-China trade war, it's been a week of rapid escalation. Beijing devalued the yuan after the Trump administration threatened to slap tariffs on just about every Chinese export. The United States then labeled China a "currency manipulator," deepening the rift.

The exchanges have rocked global markets and threaten the global economy. What happens next is anyone's guess.

China has said it is prepared to fight, if necessary. And it has one hugely powerful weapon up its sleeve: it's the American government's biggest creditor.

In theory, Beijing could trigger a panic in bond markets by dumping some of the $1.1 trillion in US Treasuries that it owns.

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WNU Editor: The problem with all of this speculation on China's US treasury holdings is that this money has probably already been leveraged for other loans (see link here). And even if China decides to sell these holdings (if it has not been used as collateral), I know that they will be bought up almost immediately. The U.S. is a $22 trillion economy, and there are many other players who would like to get their hands on these bonds. This talk of a Chinese $1 trillion trade weapon is just that .... talk.

China Blinks First. Moves To Stabilize Currency

China set the yuan’s fix rate at 6.9683 against the US dollar on Tuesday morning. Photo: Bloomberg

SCMP: China’s central bank to sell US$4.3 billion worth of yuan-denominated securities, slowing currency devaluation

* Bill issuance in Hong Kong seen as most efficient way to absorb offshore liquidity and prevent further depreciation of yuan
* Traders need to defend worst-case scenarios, especially on the yuan as the bill issuance drains liquidity from offshore markets, analyst says

China’s central bank will sell 30 billion yuan (US$4.3 billion) worth of short-term yuan-denominated securities in Hong Kong next week, signalling its plan to absorb offshore liquidity and cushion against further depreciation of its currency versus the US dollar.

The People’s Bank of China (PBOC) unveiled the plan in a statement on its official website at 9am on Tuesday, saying the operation would commence with the issuance of central bank bills in Hong Kong on August 14.

“It is a clear message that the PBOC is preventing the yuan from sharp devaluation, and that China does not want to materialise the yuan as a weapon this early,” said Zhou Hao, an economist at Commerzbank AG in Singapore.

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WNU Editor: China blinked. The consequences of being labelled a currency manipulator by the largest economy in the world is not a path that China wants. It goes without saying that China is not happy .... Trump shrugs off trade war concerns; China warns of market chaos (Reuters).

More News On China Stabilizing Its Currency

China stabilizes currency but tensions with US remain high -- AP
Yuan gains as China appears to curb currency weakness -- CNBC/Reuters
China’s Central Bank Tells Foreign Firms Yuan Won’t Keep Falling -- Bloomberg
Oil price steadies as China stops currency slide -- Al Jazeera
Stock markets inch higher as currency war fears ease -- Reuters

Is The Next Global Conflict A Currency War

Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.

— Donald J. Trump (@realDonaldTrump) June 18, 2019

Financial Review: Trump may be gearing up for a currency war

President Donald Trump has already given the global economy trade wars. Now there are signs he may be gearing up for a currency war, too.

With a series of tweets on Tuesday (Wednesday AEST) aimed at the European Central Bank and an announcement by Mario Draghi, its president, that he was prepared to cut interest rates further below zero in response to Europe's slowing growth, Trump made a rare American presidential intervention into another economy's monetary policy.

"Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others,'' he tweeted. Later, he added: "German DAX way up due to stimulus remarks from Mario Draghi. Very unfair to the United States!''

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Update #1: Trump Tweets Draghi Over Euro Drop Adding Currency to Trade War (Bloomberg)
Update #2: Currency war is the next phase of global conflict and Europe, the chief parasite, is defenceless (The Telegraph)

WNU Editor: There are some who are saying that there is no currency war, and certainly not against the U.S. .... Despite Trump's Claims, There's No Currency War Against the U.S. (Bloomberg). The problem with this claim is that countries in the EU, China, Japan are lowering their interest rates to near zero, and they are doing so in order to boost their economies.

Gold Will Be King In Any Currency War

© Leonhard Foeger / Reuters

RT: Currency war can end global US dollar dominance & those who own gold have power

The world is facing a currency war and the only hedge against the crash of the US dollar is real gold, a precious metal analyst has told RT. With geopolitical power shifting from West to East, US dominance may be ending.

One such sign is the recent repatriation of gold from the United States. Countries such as Turkey, Germany, the Netherlands have been moving the bullions home. The reason is the Cold War is over and countries don’t see Russia as a threat anymore, says Claudio Grass, an independent precious metals advisor and Mises Ambassador.

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WNU Editor: RT is right on this one. And in the case of Russia, they are putting their money where their mouth is .... Russia gets rid of US Treasury securities and buys gold (RT).

Is Russia And China Corlobarating On Devaluating Their Currencies?

© Alexandr Demyanchuk / Sputnik

Reuters: Trump says Russia, China playing 'currency devaluation game'

WASHINGTON (Reuters) - U.S. President Donald Trump accused Russia and China on Monday of devaluing their currencies while the United States raises interest rates.

“Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!” Trump said in a Twitter post.

Trump’s tweet referred to what he sees as unfair trading advantages: if a country’s currency is artificially low, its exports are more competitive. Higher U.S. interest rates would generally increase the value of the dollar, making U.S. exports more expensive.

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WNU Editor: Because of oil, the Russian ruble and Chinese yuan are becoming more intertwined. As to currency devaluations .... this has always been a tactic that governments enjoy using to increase exports, and I would not be surprised if the Chinese and Russians are speculating on doing just that.

Another Economic Shock-wave From China?

CNBC: Why China's yuan may be set for 15% devaluation

China is mulling a 15-20 percent devaluation of its currency by the end of 2016 in a move that could spark a crisis in Asian markets, according to research firm IDEAglobal.

It cited an interview it had conducted with a "reliably-informed Asian source" in a release published late on Tuesday.

China, the world's second-largest economy after the U.S., devalued its currency last month in a bid to help exporters. The country is grappling with a softening economy and wild swings in the stock market.

"Having achieved a 3 percent move in a few weeks, they would not want to stop here. Their ultimate target is probably a 15 to 20 percent minimum move in the trade-weighted index," IDEAglobal cited the source as saying in an interview.

WNU Editor: Such an action will guarantee a currency war and a stock market volatility that we have not seen in a very long time.

China Devalues Its Currency For A Second Straight Day. Global Currency War Is Now Underway

USA Today: China devalues yuan for second day

China further devalued its currency Wednesday as the world's second largest economy aggressively pushed back against slowing growth and trade, roiling global financial markets and driving expectations the currency could be set for more falls and even open a new currency war.

The People's Bank of China, or PBOC, its central bank, said the daily fixing rate for the yuan fell 1.6% after it was cut by 1.9% on Tuesday.

The yuan fell as much as 2% Wednesday against the dollar before paring losses.

Bloomberg, citing people familiar with the matter, reported that PBOC intervention to support the falling currency shortly before the market close in Shanghai Wednesday helped to limit losses.

Tuesday's yuan devaluation was the largest against dollar in more than two decades.

WNU Editor: This devaluation will impact everyone .... including you and me. On the U.S. political front, this plays into one of Donald Trump's key campaign issues .... Presidential candidate Trump: China devaluation will devastate US (CNBC).

More News On China Devaluing Their Currency For A Second Time In Two Days

Markets slide as China moves to weaken yuan again - live -- The Guardian
Global Market Sell-Off Intensifies as China Currency Drops -- NYT/AP
China Roils Markets for Second Day as Yuan Tumbles With Stocks -- Bloomberg
China central bank under pressure to weaken yuan further: sources -- Reuters
China's yuan currency falls for a second day -- BBC
Surprise China devaluation marks escalation of currency war -- Financial Times
China lets yuan fall further, fuels fears of currency war -- Reuters
China steps up currency war with dramatic renminbi devaluation -- Financial Times
Stocks, yields tumble after China pushes yuan lower again -- Reuters
China currency devaluation sends global exporters reeling -- The Independent

In The Currency Wars China is Playing To Dominate

Reuters: China devalues yuan after poor economic data

China devalued its currency on Tuesday after a run of poor economic data, a move it billed as a free-market reform but which some suspect could be the beginning of a longer-term slide in the exchange rate.

The central bank set its official guidance rate down nearly 2 percent to 6.2298 yuan per dollar - its lowest point in almost three years - in what it said was a change in methodology to make it more responsive to market forces.

It was the biggest one-day fall since a massive devaluation in 1994 when China aligned its official and market rates.

Update: China Rattles Markets With Yuan Devaluation -- Bloomberg

WNU Editor: This is just more evidence that on the economic front .... China is playing to win.

Growing Fears That Today's Currrency Wars May Lead To A Lehman-Style Crisis

Riot police stand outside the European Central Bank's headquarters in Frankfurt. REUTERS/Kai Pfaffenbach

Liam Halligan, The Telegraph: Global currency wars are threatening a Lehman-style crisis

Global currency markets made front-page headlines last week as the euro plunged towards parity with a surging dollar and the pound similarly soared against the single currency.

But why is the dollar so buoyant and the euro spiralling downward? And should you lock in the strong pound by buying your summer holiday money now?

You may, quite reasonably, think that economic fundamentals, such as GDP growth and cross-border trade flows, still drive exchange rates.

WNU Editor: In my life I have learned one golden rule when it comes to government manipulation of the economy .... in the end free markets will rule. Today's global currency wars are just the latest manifestation of government control and manipulation of markets .... that in the end will also fail.The question is when .... and I expect it will happen when we least expect it.

The World's Currency Wars Are Spreading

Bloomberg: Central Banks Now Open 24/7 Fighting Currency Wars and Deflation

Central banks are now open all hours.

Just as they worked weekends through the financial crisis, policy makers are again signaling they can strike at any time for the good of their economies.

Spooked by the threat of deflation, Sweden’s Riksbank became the latest to put investors on alert when it said on Thursday that it’s “prepared to do more at short notice” after cutting its main interest rate below zero and unexpectedly saying it will buy government bonds.

More News On The World's Currency War

Sweden cuts rates below zero as global currency wars spread -- The Telegraph
Central Bankers Ramp Up Currency Wars -- WSJ
Currency war: Who will be the casualties? -- CNBC
The Currency Wars Look Real, and the Prospects Could Be Grim -- WSJ
America's Losing the Currency War -- Leonid Bershidsky, Bloomberg
Deflation, Interest Rates and Currency Wars -- Market Oracle
One-Two-Three-Four, Who Declares a Currency War? -- Fischer Investments
Switzerland Rejoins Currency Wars -- Bloomberg
The Currency Wars’ “Pearl Harbor” -- Daily Reckoning
Currency Wars Have a Nuclear Option -- Mark Gilbert, Bloomberg

WNU Editor: Shades of the 1930s?

Here Comes The Currency Wars

Edward Harrison, Foreign Policy: What the Wild Swiss Franc Appreciation Really Means

Currency wars are coming. Will the U.S. Federal Reserve’s interest rate moves make it worse?

WNU Editor: A sobering analysis on how key nations .... by politically manipulating the value of their currencies.... are creating an economic/monetary environment that will not be sustainable in the foreseeable future.  Read it all.

China Is Prepared For A Currency War

Shinzo Abe told Japanese politicians in February that intervention on the markets is among the options being discussed. Photo: Bloomberg News

China 'Fully Prepared' For Currency War -- The Telegraph

China is "fully prepared" for a currency war, according to a top central banking official speaking in Beijing.

China's central bank deputy governor Yi Gang said: “China is prepared. In terms of both monetary policies and other mechanisms, China will take into full account the quantitative easing policies implemented by central banks of foreign countries.”

However, Mr Yi said a currency war can be avoided if policymakers follow the consensus reached at the Group of 20 nations meeting in Moscow last month.

A currency war occurs when a number of major economies compete against each other to devalue their own currency and lower the exchange rate. This cuts the price of exports from the country and makes imports more expensive – effectively boosting jobs as demand from both domestic and foreign markets increases.

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More News On China's Warnings of A Currency War

China well-prepared for currency war: official -- Xinhuanet
China warns US and Japan against waging a currency war -- The Australian
China "fully prepared" for currency war: banker -- France24/AFP
China Official Says Ready To Battle Weak Dollar, Euro -- Forbes
PBOC’s Yi Says China Prepared for Currency War, Xinhua Reports -- Bloomberg Businessweek

Brazil Believes The 'Currency War' Is Intensifying

Brazil Declares New ‘Currency War’ -- Financial Times

Brazil has declared a fresh “currency war” on the US and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country’s struggling manufacturers.

Guido Mantega, the finance minister who was the first to use the controversial term in 2010, said the government would not “sit by passively” as developed nations continue to pursue expansionary monetary policies at the expense of Brazil.

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Update #1: Brazil currency wars: the sequel -- Financial Times
Update #2: Brazil slams rich countries over 'currency war' -- Reuters

My Comment: Wars and conflicts between nations sometimes does not involve weapon systems as we know it .... a point that Brazil and many emerging economies can attest to.The flood of easy money in the U.S. and Europe has had a devastating impact on emerging countries like Brazil. Unable to compete, emerging markets have now lost their markets overseas and are suffering the consequences of these loses through high unemployment and manufacturing shutdowns. This is a currency war, and while the buildings will still be standing and the trains will run on time .... there will be millions of victims through unemployment and lack of opportunity.

My prediction .... Brazil and other emerging countries will (in the beginning) be successful in countering the developed world's monetary measures .... but this is a short term success story. Countries like Japan, the U.S., and the E.U. .... combined they rule the world's economy .... and in the end their sheer size and economic strength will dictate where this "currency war" goes .... which in this case will be to favor themselves.

Tensions Rise In Global Currencies

Tensions Rise In Currency Wars -- Financial Times

If the world’s shell-shocked investors thought that 2011 might see an outbreak of peace in the currency wars, they were sadly mistaken. Not only did Brazil last week take more action to stem the rise in the real but Chile, one of the most free-market of emerging economies, has also unveiled a campaign of intervention against its currency.

With a sense that the battles against destabilising capital inflows are here to stay has come a determination to set new rules of engagement on controlling them. But given the uncertainty and political explosiveness around the issue, any such venture faces a tough future.

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My Comment: All artificial attempts to manipulate and regulate a currency ends in failure .... as to today's currency markets, we are starting to witness a cycle of these failures right now. Throw in a trade war .... then it becomes interesting.

The U.S. Dramatically Heats Up The Currency Wars

Fed To Spend $600 Billion More To Help Boost US Economy -- CNBC

The Federal Reserve launched a controversial new policy on Wednesday, committing to buy $600 billion more in government bonds by the middle of next year in an attempt to breathe new life into a struggling U.S. economy.

The decision, which takes the Fed into largely uncharted waters, is aimed at further lowering borrowing costs for consumers and businesses still suffering in the aftermath of the worst recession since the Great Depression.

Read more ....

More News On Today's US Fed Decision

New York Fed's Statement Regarding More Purchases of Treasury Securities -- Bloomberg

Fed to buy $600 billion in bonds to aid economy -- Yahoo News/AP
Fed takes bold, risky step to bolster economy -- Yahoo News/Reuters
Fed resumes massive spending to spur recovery -- Yahoo News/AFP
Fed Will Buy $600 Billion in Debt, Hoping to Spur Growth -- New York Times
Fed to Buy $600 Billion of Treasurys -- Wall Street Journal
QE2: Fed pulls the trigger -- CNN
After the Midterms: Federal Reserve Pumps $600 Billion Into Economy -- ABC News
Fed launches new round of easing -- Financial Times
Full speed ahead -- The Economist
QE2 risks currency wars and the end of dollar hegemony -- The Telegraph
Enter QE2, followed by dollar drama and hope -- Business Times
The Global Monetary System in Crisis: The Currency War Is Leading to a Trade War -- Global Research
G-20 seeks to stop currency war -- Market Watch
What exactly is QE2? -- International Business Times
Why the Fed's Quantitative Easing Is Overblown This Time -- U.S. News And World Report
Will US printing money boost economy? -- BBC

One More Sign That The Currency Wars Are About To Heat Up

QE2 Risks Currency Wars And The End Of Dollar Hegemony -- The Telegraph

As the US Federal Reserve meets today to decide whether its next blast of quantitative easing should be $1 trillion or a more cautious $500bn, it does so knowing that China and the emerging world view the policy as an attempt to drive down the dollar.

The Fed's "QE2" risks accelerating the demise of the dollar-based currency system, perhaps leading to an unstable tripod with the euro and yuan, or a hybrid gold standard, or a multi-metal "bancor" along lines proposed by John Maynard Keynes in the 1940s.

China's commerce ministry fired an irate broadside against Washington on Monday. "The continued and drastic US dollar depreciation recently has led countries including Japan, South Korea, and Thailand to intervene in the currency market, intensifying a 'currency war'. In the mid-term, the US dollar will continue to weaken and gaming between major currencies will escalate," it said.

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My Comments: Wars and conflicts are not always measured by how many soldiers, tanks, and airplanes are used in a conflict. Money and finance can sometimes have a greater impact and cause more destruction than what bombs and bullets can sometimes achieve.

The U.S. is now positioning itself to inflate away its debt and financial liabilities, an action that will undermine everyone's currency position in global trade and employment. The impact from pursuing such an action has raised everyone's apprehension and fears that a currency war will produce the same environment that led to the Great Depression .... and they are probably right.

World Currency Wars Heats Up As U.S. Dollar Falls

Dollar Fall Sparks Stability Warnings -- Financial Times

The dollar tumbled against most major currencies on Thursday, prompting warnings that the weakness of the world’s reserve currency could destabilise the global economy and push other countries into retaliatory devaluations to underwrite their exports.

Increasing expectations the Federal Reserve will pump more money into the US economy next month under a policy known as quantitative easing sent the dollar to new lows against the Chinese renminbi, Swiss franc and Australian dollar. It dropped to a 15-year low against the yen and an eight-month low against the euro.

Read more ....

More News On The World's Currency Crisis

Dollar tanks, stocks drop as Bernanke speech looms -- Yahoo News/AP
Currency war risk threatens investment recovery: U.N. -- Reuters
China's yuan hits new high at 6.6497 against U.S. dollar Friday -- Xinhuanet

Japan, South Korea are new front in currency war -- Market Watch
Japan Prime Minister Kan Says Country Will Take Action on Yen if Necessary -- Bloomberg
In Tokyo, Weak Won Worries Worsen -- Wall Street Journal
G-7, G-20 Ignores Japan’s Role in Currency War -- Dallas Blog

No Euro-Zone Currency War, Just Tough Choices on Reform -- Wall Street Journal
Russia calls for "peace", not currency wars -- Reuters

Geithner Sees ‘No Risk’ of Currency War -- Wall Street Journal
Geithner Sees "No Risk" of Currency War -- ABC News
'No risk' of currency war: Geithner -- AFP

Why Do Currency Wars Start? -- Foreign Policy
The currency war is phoney -- John Ross, The Guardian
U.S. is currency war's "tomb maker": China economist -- Reuters
How to stop a currency war -- The Economist

Are We In The middle Of A Global Currency War?

Guido Mantega, the Brazilian Finance Minister, said an international currency war threatened the country's competitiveness.

Capital Controls Eyed As Global Currency Wars Escalate -- The Telegraph

Stimulus leaking out of the West's stagnant economies is flooding into emerging markets, playing havoc with their currencies and economies.

Brazil, Mexico, Peru, Colombia, Korea, Taiwan, South Africa, Russia and even Poland are either intervening directly in the exchange markets to prevent their currencies rising too far, or examining what options they have to stem disruptive inflows.

Peter Attard Montalto from Nomura said quantitative easing by the US Federal Reserve and other central banks is incubating serious conflict. "It is forcing money into emerging market bond funds, and to a lesser extent equity funds. There has truly been a wall of money entering many countries," he said.

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More News On The Fears Of A Coming Global Currency War

Currency war fears tinge IMF meetings -- Yahoo News/Reuters
Threat of currency war highlights rates issue -- Globe And Mail
Scary Times for Currencies -- Wall Street Journal
The looming threat of currency wars -- Live Mint
Currency Wars entering the "hot" phase -- International Business Times
Currency wars -- Financial Times
We're In a Global Currency War ... But What Does It Mean? -- Global Research