Skip to content
Subscriber Only
Mark Gilbert and Marcus Ashworth

A Currency War Is the Last Thing the World Needs

The ECB’s chief economist made a rare verbal intervention that stemmed the dollar’s drop. Policy makers need to tread carefully in FX.

Stronger but weaker.

Stronger but weaker.

Photographer: Bloomberg/Bloomberg

“It's our currency, but it’s your problem,” John Connally, Richard Nixon’s treasury secretary, told the world in 1971. Four decades later, the dollar’s weakness threatens to incite a full-blown currency war that could distract policy makers from their key task of mending the post-pandemic global economy.

The U.S. currency has been on a downward trend for several months. The Federal Reserve’s recent shift to an even more dovish stance — saying that it will allow inflation and the labor market to run hotter for longer than previously — looks set to exacerbate the dollar’s decline.