Another Currency War Is Brewing on the Horizon
(Updated 07/21/2018) (Bloomberg) The currency war has arrived as the U.S. and China open up a new front in their increasingly acrimonious game of brinkmanship. The repercussions could threaten the global financial order. Supply-and-demand, inflation , interest rate differentials , purchasing power parity , and other economic factors will cause changes to a currency's relative worth. [1,29] For example, a country's currency tends to appreciate under the following conditions: Less accommodative monetary policy or fiscal austerity [13] by Raising interest rate For example, Fed Chief Paul Volcker hiked interest rates to fight off inflation during the 1970s and early 1980s and subsequently the dollar surged 78% from June 1980 to December 1984. Under the best practices, governments are encouraged to use interest rate tools rather than manipulate the exchange rate. Slashing budget Stronger economy Recently, the dollar surged to its highest level in nearly s...