Does the Yuan Have a Clear Advantage in the Global Currency War?
World Market Pulse submits:As the global economies, businesses and market trends change momentum towards the east, the relationship between a country's economy and its currency is getting much more complicated as governments across the globe are assuming a bigger role in propping up the financial system and encouraging economic growth. What started as a small echo with allegations of China knowingly undervaluing its currency has now grown into a currency war after the Japanese government's intervention in the currency markets by weakening the Yen for the first time in six years. This happened while the counter strike from the Dollar came, as the Fed announced the readiness to introduce a new round of quantitative easing to boost the economy. Such has been the impact of the recent currency games that IMF chief Dominique Strauss-Kahn has now joined those warning that governments are risking a currency war if they try to manipulate exchange rates to solve domestic problems. Experts meanwhile feel that if the currency games continue for a long term, investor confidence in international currencies could break down to such an extent that it could lead to sharp changes in the near future. A few forex experts and analysts have expressed concern that Chinese Yuan could very well emerge as the next preferred currency of global trade as and when the dust settles down from the current tit for tat mechanism. If investor confidence is shaken up badly by the prolonged currency tug of war, the absence of any other credible alternative to the US dollar as the reserve currency of choice might just work in favor of the Chinese Yuan.Complete Story »