Competitive Devaluation of Forex Currencies

2,245 views

Published on

Competitive Devaluation of Forex Currencies

http://www.theforexnittygritty.com/forex/competitive-devaluation-of-forex-currencies

Today in the world of Forex exchange trading there appears to be a competitive devaluation of Forex currencies. That is to say, more and more central banks are buying other currencies, setting low interest rates, or running up debt as a means of reducing the value of the home currency. To understand how this competitive devaluation of Forex currencies will play out let us first look back in history. As Japan rose from the ashes of World War Two it built its economy on exports to North America and Europe and later to the rest of the world. Cheap and poorly made products were the first wave and then Japan emerged as a maker of high end electronics, automobiles and more. When Made in Japan was and meant cheap it was easy to sell low priced goods to willing customers in the USA especially. When Japanese goods improved and become more expensive Japan had to find a way to keep prices down and exports up. Thus Japan bought foreign currencies, primarily US dollars and by way of currency manipulation kept the Yen low and kept its exports flowing. To a great degree the current competitive devaluation of foreign currencies is an attempt to follow the Japanese model. But, how is that going to work out? And what should someone who speculates on foreign currency rates do, to profit in the coming weeks, months, and years?

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
2,245
On SlideShare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
10
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Competitive Devaluation of Forex Currencies

  1. 1. Competitive Devaluation of Forex Currencies By www.TheForexNittyGritty.com
  2. 2. • Today in the world of Forex exchange trading there appears to be a competitive devaluation of Forex currencies. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  3. 3. • That is to say, more and more central banks are buying other currencies, setting low interest rates, or running up debt as a means of reducing the value of the home currency. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  4. 4. • To understand how this competitive devaluation of Forex currencies will play out let us first look back in history. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  5. 5. • As Japan rose from the ashes of World War Two it built its economy on exports to North America and Europe and later to the rest of the world. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  6. 6. • Cheap and poorly made products were the first wave and then Japan emerged as a maker of high end electronics, automobiles and more. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  7. 7. • When Made in Japan was and meant cheap it was easy to sell low priced goods to willing customers in the USA especially. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  8. 8. • When Japanese goods improved and become more expensive Japan had to find a way to keep prices down and exports up. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  9. 9. • Thus Japan bought foreign currencies, primarily US dollars and by way of currency manipulation kept the Yen low and kept its exports flowing. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  10. 10. • To a great degree the current competitive devaluation of foreign currencies is an attempt to follow the Japanese model. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  11. 11. • But, how is that going to work out? And what should someone who speculates on foreign currency rates do, to profit in the coming weeks, months, and years? http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  12. 12. • What Is Good for One Is Good for Two, Three, or Four http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  13. 13. • Currency devaluation as national policy worked for Japan and then for Taiwan, South Korea, and Mainland China. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  14. 14. • The problem may have started when China industrialized and started trading with the rest of the world. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  15. 15. • Its economy grew and attracted investment. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  16. 16. • China flooded the world with underpriced goods and may well have been part of the cause of the worst recession in 75 years. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  17. 17. • The result of the recession was and is that North Americans and Europeans are buying less from China, South Korea, Taiwan, and Japan and thinking seriously about devaluing their own currencies. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  18. 18. • The stated reason for devaluing Western currencies is to stimulate Western economies. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  19. 19. • However, a beneficial side effect of these policies is to make it profitable to bring industry back to the West. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  20. 20. • Now we are not talking about half a dozen strong economies manipulating the currency markets. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  21. 21. • We are seeing the USA and EU, far and away the two largest economies in the world, seeking to devalue their currencies. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  22. 22. • Who will win this competitive devaluation of currencies? And how can a Forex trader make a profit? http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  23. 23. • Long Term Trends and Short Term Detours http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  24. 24. • Fundamental analysis of Forex pairs tells us where the eventual relative values of a currency pair will stand. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  25. 25. • Technical analysis of Forex pairs is essential to short term profits. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  26. 26. • If the major economies choose to devalue their currencies then we can expect to see the USD and EUR being substantially cheaper over time. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies
  27. 27. • However, when the US decides to ease off on its stimulus program, for example, expect a short term rise in the value of the USD as interest rates rise in the USA. http://www.theforexnittygritty.com/ forex/competitive-devaluation-offorex-currencies

×