Currency war is a situation which is also known as the competitive devaluations. In this state of currency war, there is a situation of international affairs in which the countries try to seek a situation of trade advantage over the other countries and they does this by causing their own exchange rate to fall down in relation with the other currencies. When the exchange rate of the countries fall down the exports in the other countries suddenly becomes more competitive with an inverse relation with the import as the import becomes more expensive. This decrease and increase in the exchange rate is most of the times beneficial for a country as it benefits the employment and the domestic industry and receives a boost in demand from both of the foreign and domestic markets. However this may be good for the economy of a country but not so good even harmful for the local people. The prices are increased for the import goods and the cost of the foreign travel. These things are just enough to harm the purchasing power of the citizen. And if all countries around the world takes the similar approach, and adopts a general strategy there will a general decline in the international trade harming all of the countries.
A “Currency war” is a fight, yet it’s basically financial. It’s about monetary approach. The essential thought is that nations need to undermine their money. Presently, they say they need to spoil their money to advance fares. Possibly it makes a Boeing more aggressive globally with Airbus.
Yet, the genuine reason, the one that is less discussed, is that nations really need to import expansion. Take the United States for instance. We have an exchange shortfall, not an overflow. In the event that the dollar’s less expensive it might make our fares somewhat more appealing.
THE RECENT CURRENCY WAR:-
DONALD TRUMP AND THE CURRENCY WAR:-
The Currency war began in the US in 1930. And since then we have a lot of currency wars going inside the US with the different intensities. But with the election of Mr. Donald Trump as the president of US, the currency war has taken a new turn and the situation has turned into somewhat like a battle- a new major battle. The Currency wars in the US have brought a decline in the trade of the United States of America. Although it is seemed that US currency- Dollar is not only at the currency war with the China and China is not an only manipulator but there are countries like Germany and Japan. So the Trump has announced to start a currency war with these countries as well. it is seen that American Dollar wants to end its status of the King Dollar and lessen and reduce its rates
The Foreign Situation:-
But the question remains that it is really possible to start the currency war in the US? The Fed won’t bring down rates since it is in a fixing cycle. The Fed will likely be bringing rates up in March and perhaps in the not so distant future. That makes the dollar more grounded. China is attempting to prop up the yuan however is coming up short on dollar stores to do as such and should downgrade before they become bankrupt. Germany may like a more grounded euro to battle swelling, yet the choice is not so much in their grasp — it’s up to the European Central Bank, and the ECB is still occupied with QE for the present. So is the case with the Japan that Japan is not in the position to afford a stronger Yen because they have the highest debt to GDP ratio of any major economy.
If the China, Japan and Germany are not willing to give Trump these options how can a Currency war be started. It is always seen that currency wars just do not remain the currency wars they ultimately turn into some sort of trade wars and some form of the systematic collapse. This will be happening in the US if it forces the country to start a currency war.