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Currency War.....A letter to Fimour! Let us discuss something else today. Something about the currency war, which is going on for a long without a declaration formally by the Countries, involved! The silent war has already affected me. It might have affected you also. Perhaps you are not aware of it. All major economies including the Eurozone countries, Russia, Japan, and China have depreciated their respective currencies against the dollar! Just compare the current exchange rate of your currency with US Dollar and see how much the dollar’s value appreciated during the last year! The exchange rate for the euro has dropped from 1.4 to a dollar to 1.12 in one year and the Japanese yen dropped from .012 in 2013 to .009 in 2015. Russia's ruble has nosedived. Do such changes affect our lives in any way? If you are an American and if you travel a lot, you will be happy for obvious reasons. If you like to drive a Japanese car, you will be delighted if the dollar appreciates more than now! However, those who make money by exporting American products would not be happy. The American Car manufacturers will not be happy either. How much the currency war affects me? I am not an American. Do I need to bother with the unseen problem? Yes, I have to bother about the currency war now being silently fought! Do you know why? The answer is simple. My currency is pegged to the American dollar and we have allowed it to appreciate against the euro and some other currencies!! Simple as that!! What are the impacts of a depreciating currency? It has multiple impacts. When my currency depreciates against other currencies, our exports become cheaper, and, inversely, imports become more expensive. We are to pay more for our travel. Rather we have to bring a cut on our travel plan unless we are filthy rich. We may have to drop the idea of joining a get-together somewhere in America! We may not be able to buy the Japanese car either that we hoped to drive for so long. Not being a petroleum-producing country, the cost of petrol would go up. However, our garments would be cheaper for customers who prefer shopping at Macy's or elsewhere like it in America. Hope, we now understand why countries let their currencies depreciate. Yes Fimour, you are correct. It is for boosting exports and stimulating demand for domestic products. We may not, however, forget the harmful effects of depreciation. It pushes up the domestic rate of inflation. I should stop now. It is getting long, Fimour. However, I hope that this will make you understand why it will not be possible for me to be with you this winter!! Have a wonderful summer, Fimour. 
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Thank you so much for your decent comment. I appreciate. Have a wonderful time.
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Looklook mbn, hi, Thank you for this informative blog, it really gives us a good idea of the current monetary situation accordingly. However, you being in the monetary field since quite long, you have a very good knowledge and experience on it as well. As I have traveled a lot in my life until recently, I have a quite good knowledge on different currencies too and it's easy for me to convert the most reputed currencies as well. As for us in Mauritius, the value of the foreign currencies are down nowadays, Euro, US Dollars and the British Pound too. These are the three highest currencies being dealt with here and in most countries worldwide. For our exports, imports and for our Off Shore Banking, there will be a short downfall as well. But as for buying these foreign currencies, it would be to our advantage, just as for me, to buy Euro to send for my daughter in France for her living and expenditures, it will be to my advantage cause the exchange rates is low nowadays. I could talk more on this issue but my comments would be too long, so I rather stop here, thanking you for this topic and wishing you all my very best. My kind regards to you, keep well and take care. Lisa. .
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Boogie, thanks for reading the blog and also for leaving your meaningful comments there on. The problem is no doubt global. A global currency war is going on without a formal declaration of war. At least I feel so. We all know why the war is being fought unannounced. As US Dollar is very strong now, you may avail the opportunity to travel to the countries which you consider as relatively safe. But again , you must be careful while choosing and traveling! Best wishes to you.
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Looklook mbn, hi, Thank you for this informative blog, it really gives us a good idea of the current monetary situation accordingly. However, you being in the monetary field since quite long, you have a very good knowledge and experience on it as well. As I have traveled a lot in my life until recently, I have a quite good knowledge on different currencies too and it's easy for me to convert the most reputed currencies as well. As for us in Mauritius, the value of the foreign currencies are down nowadays, Euro, US Dollars and the British Pound too. These are the three highest currencies being dealt with here and in most countries worldwide. For our exports, imports and for our Off Shore Banking, there will be a short downfall as well. But as for buying these foreign currencies, it would be to our advantage, just as for me, to buy Euro to send for my daughter in France for her living and expenditures, it will be to my advantage cause the exchange rates is low nowadays. I could talk more on this issue but my comments would be too long, so I rather stop here, thanking you for this topic and wishing you all my very best. My kind regards to you, keep well and take care. Lisa. . Thanks for your detailed comments on the blog of mine. It pleases me very much to note that the post has been studied by you with interest. It appears that your currency is also pegged to US Dollar. That is why you could buy Euro for you daughter at a exchange rate most favorable to you. May be your imports are also cheaper there. As you drive a beautiful Japanese car, you need not buy a new one! However, I wonder about your exports! It may be possible that your Central Bank would allow the Rupee to slide against dollar as done by India to correct the export situation! Lisa, you know that I am no more active in the monetary field . I live a retired life now. However, I still try to keep myself informed of the developments that are taking place in this particular field. Hope your daughter is keeping well. Please take care and always remain happy and cheerful. May God protect you, Lisa. Kindest Personal Regards. look.
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This is indeed an interesting topic. I have some questions for you. Is it not true that the relative exchange rate of one currency to another is not a voluntary act of depreciation, as I seem to gather from your blog, but directly related to the strength of the currency which depends on the amount of a currency in circulation, the interest rate that the nation is paying for money that it borrows and the GDP of the country? Taking the Euro as an example which has a exchange rate more near parity to the dollar presently than before, the Eurozone with the exception of Germany, is still reeling from the effects of the the economic crash of 2007-2008. The slow recovery in Europe is widely recognized as being due to the austerity programs that have been instituted. Russia's currency is notably weakened by the effects of lower oil prices...or so it would seem to me. Do you concur with this assessment? I have no reason to disagree with your comments left here on but I must point out that such voluntary act of depreciation always happens when a particular country wants to rectify prevailing wrongs to bring the sluggish and week economy back on rails. What you have mentioned is applicable for normal times. You have also mentioned in your comments that Eurozone with the exception of Germany, is still reeling form the effects of economic crush. Therefore, a corrective action such as voluntary depreciation of Euro to rectify the situation, is not an unusual thing to take! I may take this opportunity to point out here that Japan, Canada, Switzerland, India and the Eurozone economics are not growing in a fast manner and as such the central banks are providing QE (Quantitative Easing) to stimulate their respective economies. This measure is also weakening their currencies. Is not the measure a voluntary one? The case of Russia is different. It is both man made and otherwise too. Russia's ruble has nosedived since the rest of world imposed economic sanctions against it and due to the price of oil which has also gone down.Therefore, I am inclined to call the depreciation of Russian currency is nothing but Voluntary. They had no other way at their disposal to keep the country on the rails! We must keep in mind that during an abnormal time, nothing normal works!! Thanks once again for stopping by my blog and for leaving such thoughtful comments.
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