By James McKee
As economic conditions grow worse throughout the world many officials are left with wondering if it is time to “pull out all the stops” and begin resorting to currency wars. The primary focus of the recent G20 summit seems to have been trade deficits between China and the United States in which the United States appears to be seeking out solutions. This has upset many smaller nations who feel that the G20 should have been more “well rounded” and addressed problems aside from those being suffered by the United States. The recent rise and fall of the US dollar certainly seems to be on everyone’s mind when it comes to the Forex market and the United States government seems to be making efforts to release its trading deficit.
When one country’s currency is devalued by another this can result in the rapid buying and selling of the opposing country’s currency, depending on the situation this cause either a rise or a fall in their currency value. Such efforts may in fact prove to be necessary if events such as the G20 leave many countries feeling “out in the cold” with regard to global economic policy change. This can certainly be a good thing for Forex traders though because currency wars will be very public affairs with predictable results that a clever trader can bet on accordingly.
One of the other major issues on the chopping block at the G20 summit was an initiative to limit a country’s surplus to 4% of their own GDP. This is a move that many believe will motivate China to raise the value of their currency. This is a move that would force China to spend considerable amounts of their enormous financial surplus that severely dwarfs any other in the world. If this did come about it would help the US economy immensely and of course every other economy in the world.
About the Author
Author is a Forex trader and financial analyst residing in Denver, Colorado. To stay up to date on all the latest developments in the financial world and beyond be sure to check out the forex exchange rates regularly.
