Tuesday, August 11, 2015

Opening shot fired in currency war?

China's unexpected devaluation of its currency lead to a decline in world wide stocks, global commodity prices, and and increase in US bond prices.  This could be the opening salvo in a long and expensive currency war:
One reason is that it raises fears of a more intense and destabilising currency war — the trend for countries to use a weaker exchange rate rather than supply-side efficiencies — to bolster exports. ... 
Tuesday’s PBoC move followed the release of weak trade data over the weekend that showed exports tumbled 8.3 per cent in July from a year earlier.

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