Should investors and expats be concerned by currency wars or not. I think they should.
In January this year I said I thought the pound would devalue afainst the dollar. If you followed the advice and bought a warrant you coukd have made 50% plus. What now then for the currecy markets? G20 last week issued the following statement .
We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes,’ – closing statement from the G20 financial leaders in Moscow.
The text said that monetary policy should be directed towards domestic price stability and economic recovery. However, many believe that it is the ultra-loose monetary policy of the Federal Reserve and the Bank of Japan – aimed at helping their domestic economies to grow – that has depressed the dollar and the yen and sparked the ‘currency war’ debate.
In the United States, QE entails large-scale bond buying, currently $85 billion a month – whilst this helps economic growth it has also unleashed destabilising capital flows into emerging markets. A commitment to minimise such ‘negative spillovers’ was highlighted by China, fearful of asset bubbles and a loss of it’s competitiveness in exports.
I personally believe we will continue to see big movements in the currency market. Expats and investors should seek advice from a qualified adviser.
Nigel Green deVere Group
Blog written 17th February