Currency War? What’s IMF Going to Do About it? What does “Currency War” mean for Forex Trading?
READ THIS BEFORE YOUR TRADING ON 8 OCTOBER!
IMF meets amid threat of currency war
Posted: 08 October 2010 1026 hrs 
|
|||||||||||
|
|||||||||||
|
WASHINGTON: The spectre of a damaging global currency war is set to dominate a meeting of economic powers in Washington Friday, amid bleak hopes for a deal between China, the United States and other powers.
Finance ministers and central bankers from 187 countries will convene for an annual meeting of the International Monetary Fund amid warnings that beggar-thy-neighbour policies could wreck the global recovery.
With the recovery still painfully slow, recent weeks have seen a range of countries from Japan to Colombia intervene to stop their currencies from rising to levels that would make exports prohibitively expensive.
But the summit is set to be dominated by a long running and increasingly antagonistic dispute between the United States and Beijing — whose weak yuan policies are accused of slowing the global recovery and hurting American jobs.
While the US Congress moves toward slapping retaliatory sanctions on Chinese goods, Washington has ratcheted up the pressure by hinting that China may not be allowed a bigger say at the IMF unless the currency issue is resolved.
US officials are adamant that the IMF meetings should address the need for “market oriented exchange rates” and a fundamental “rebalancing” of the global economy.
On the eve of the meeting IMF chief Dominique Strauss-Kahn said there was no “formal” link between the two issues, but the United States was “right” to call for reform.
“I think it is right to insist on the fact that the more an emerging country will have a voice and representation in the fund, the more they have a responsibility in the stability of the system.”
“You can be at the centre of the system, or you can be at the border of the system. But if you want to be at the centre of the system… it goes with having more responsibility.”
China has rebuffed pressure to lift the value of the yuan, fearing it would put Chinese businesses at risk.
Meanwhile European officials said a rapidly rising euro, victimized by an undervalued US dollar and Chinese yuan, could threaten eurozone recovery and vowed to press both Washington and Beijing to take action.
India warned that imbalances in the global economy have become “unsustainable” but called on major economies to avoid confrontation to avert a feared currency war.
On Thursday Indian Finance Minister Pranab Mukherjee, speaking ahead of a meeting of top economic policy-makers in Washington, said that building an international consensus was the best way forward.
But reaching that consensus appears to be an uphill struggle.
Youssef Boutros-Ghali, who heads the International Monetary Fund’s steering committee, said a quick agreement on currency exchange rates was unlikely.
When asked if action before next month’s G20 summit in Seoul was feasible, Boutros-Ghali said “this late in the game, no. But in the coming three to six months, yes absolutely.”
Some are pressing for quicker action. The IMF has warned that rich and emerging economies must dramatically change the way they trade with each other or risk throttling the recovery.
In its latest economic outlook, the IMF said growth would slow more than previously expected in 2011, as the United States, Europe and Japan continue to struggle and China remains overly dependent on exports.
Wading into sensitive political waters, the IMF said China must allow its currency to strengthen to boost domestic demand and reduce its reliance on exports.
“To the extent that a stronger Chinese currency eases this process, other surplus countries in the region could follow suit, which would facilitate the needed shift towards domestic sources of growth.”
As part of that rebalancing IMF members are also expected to discuss how to reform decision making at the fund, giving more say to emerging and developing economies.
Europe, seen as a major loser from the reshuffle, has been reluctant to reduce its voting share or representation on the IMF’s decision-making board.
European finance ministers last week agreed to review representation at the Washington-based international lender, but attached significant conditions.
Of the 24 seats on the IMF’s board, Europe currently holds nine and said it was willing to rotate two of those spots with emerging markets.
-AFP/ac
Julian’s Comments: As a Forex trader, this is a serious event that you need to understand and be concerned about. The large volatilities leading toward this end may have been great to trade. But beyond your MT4, Dealbook 360 or any FX Platform you may be on, the current currency trends can and will affect the way you live – price of cars, air-flown food, the clothes you wear – the worth of the money you have left in your bank account. During the Great Depression decades back, the seemingly stable Aussie Dollar halved against the USD, IN WEEKS! It’s crucial that you understand how the strength of one currency can be another country’s peril and as well as the country’s own peril – then only can you properly hedge your assets against these volatilities.
Wisely, look beyond currencies. I.e. Gold, Soya Bean, Coffee, Wheat, Sugar, Cotton, Oil, – all these are POWERFUL financial tools that cannot be slighted and ignored. Gold has proven to be a very good, safe investment alternative. Trade it in equal amounts to your account cash balance, i.e. 1:1. But if you’re adventurous, you can’t go too wrong even if you traded 1:2 – as a long term long trade would yield gains amid short term corrections. If the Gold Price is out of reach for the penny investor, did you know that Sugar, like Gold, also hit a high yesterday? Trade all these, and spot Forex under once convenient MT4 Trading Station with FXPRIMUS.CC. Trade Gold at this broker with low spreads of 50 pips ONLY – and NOT 100-200 pips like on other platforms.
Sugar Trading | Sugar Chart | Trade Sugar MT4
