The Dollar Is on a Rampage, But Not on the Attack
A surging US currency, and weakening counterparts in Asia, aren’t signs that the world is entering a new FX war.
Currency wars: the bogey that just won’t die.
Photographer: Eva Hambach/AFP/Getty Images
An unfortunate byproduct of the dollar’s unexpected surge has been the revival of a bogey that just won’t die: currency wars. The phrase gets thrown about during periods of dislocation in the foreign-exchange market and has the beauty of meaning whatever the person who utters it desires. Conflicts in the world of FX are usually difficult to win. They are even harder to spot.
The two words certainly attract attention. Once they force their way into discourse, they can be tricky to banish. More’s the pity because they obscure more than illuminate. There’s a strong case to be made that in the contemporary era that there are few true FX conflicts, much less military-style actions launched with the aim of gaining a competitive advantage for exports. The term is now being bandied around to describe a scenario where South Korea, Taiwan, Indonesia — and even China — are pushed into weakening their currencies to guard against the effects of a languishing yen. Never mind that Japan itself is very uncomfortable with its currency’s underperformance and working to limit the decline.