Dollar Yuan Currency War Threat
Published / Last Updated on 07/10/2010
Dollar Yuan Currency War Threat
by Ashley Clark, Director
The International Monetary Fund (IMF) has warned that a global currency war is a real threat to economic recovery. The IMF for some time now has been suggesting that China needs to stop undervaluing its currency.
Both Europe and Japan have criticised China for keeping its currency, the Yuan, undervalued.
China, by undervaluing its currency means that its exports are very cheap and imports are expensive. In short, it is selling its goods to the outside World cheaply and undercutting other nations goods, but making it very expensive for people in China to bring in i.e. buy international goods and services.
It has been muted that countries like the US, if the position is not reversed, may enter a currency war devaluing the dollar to support its own exporters.
The IMF chief's warning of currency war as a “real threat” that may perilous for a global economic recovery given that many countries trade and indeed currencies themselves are pegged to the dollar.
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