Can G20 Finance Ministers Prevent Currency Wars?

Market Leader informed

Today, on 22 October, South Korea is hosting an important meeting of G20 finance ministers intended to prevent ‘a currency war’ worldwide. The meeting of the world’s leading countries such as the US, Canada, Russia, Germany, France, Japan, China, India, Brazil and others traditionally chaired by the host country’s Minister of Finance is convened to analyze reasons of the currency war that has broken out and main contradictions among G20 leading nations in the war and adopt a summary document drafted, as unofficially reported by Dow Jones, a US-based agency, to include text that the West’s wealthy nations and rapidly developing countries with emerging markets will assume mutual obligations of ‘refraining from competition in the area of devaluation of national currencies’.

What does a currency war mean in the context of a crisis? According to our experts at the Masterforex-V Trading Academy, a currency war, under global crisis algorithms by MF, is intended to devalue national currencies and gain a more beneficial position against competitors in terms of exports of goods in global markets. As a result, national states are actually involved in protectionism favoring their own manufacturer, creating most advantageous competition conditions in global markets for them. This protectionism in the context of a de-facto currency war can cause a currency collapse in the global financial system when all world’s currencies start suddenly losing their value.

A quick note
* Japan got actively involved in the currency war with its unsuccessful currency interventions in an attempt to stop further growth of the yen against the US dollar, sterling and euro. Global banks actually objected to the currency intervention and strengthened the yen against the US dollar to a level… even higher than it was before the Bank of Japan’s currency intervention. As a result, the Japanese crisis still persists, exports of Japanese goods were dealt another heavy blow, Japanese government is losing trust of its people, and the most pessimistic scenario made by the Masterforex-V Treading Academy Land Association of Japanese Traders and Investors in a forecast called Japan: What Went Wrong in the Model of the Globally Renowned ‘Economic Miracle’? is becoming a reality while Japan’s place as the second global superpower is being taken up, steadily but surely, by China. What are Japan’s authorities going to do next? Carry out… another currency intervention.

The chart clearly suggests that this results in a strengthening of the yen against the US dollar in a situation when Japan itself needs… a cheap yen:


* trade and currency wars between China and the US have been under way for a few years in a row. A number of experts regard them as struggle for global supremacy in economy, culture, finance. The US takes the most active position in this struggle (as the leading global nation). Its Congress and the Department of the State demand that China stop actively ‘depreciating’ its currency as a tool for economically occupying the universe and degrading the main ‘currency monopolist’ to the role of the second fiddle. US Government’s plans don’t include devaluation of its own currency and the US dollar is not going to lose ground according to Timothy Geithner, the US Secretary of the Treasury, in his interview to The Wall Street Journal, a well-known American publication. No one needs to explain what an ‘overvalued’ yuan means for the US and how the US economy will be affected when the entire world rushes in a crowd to buy the Chinese money… However, despite all US effort, on 20 October the Chinese Central Bank increased the interest rate as another proof of China’s determination to strengthen its national currency. Presumably ‘currency wars’ are only gaining impetus and who knows what this will end up with…

Yuan chart



* Russia’s decision to devalue the ruble against the US dollar. It was noted in the Market Leader’s article What is the Lesser Evil for A. Kudrin: Retirement Age, Ruble Depreciation or Higher Taxes?, Aleksey Kudrin, the Minister of Finance of the Russian Federation, has stated that the RF will not increase retirement age for its people and, accordingly, the government is planning to increase taxes and depreciate the ruble to support Russian manufacturers of goods.

Ruble chart

* the Republic of Belarus also abruptly depreciated its national currency, the Byelorussian ruble, against the US dollar and euro. See further details in The Trend of the Byelorussian Ruble as an Indication of How CIS Members’ Economies are Developing?



Are ministers of finance of 20 leading nations of the world able to reach an agreement and put an end to the currency war they wage on each other?

Full topic You can read here: Can G20 Finance Ministers Prevent Currency Wars?
You are free to discuss this article here:   forum for traders and investors