US-China Trade War Results To Growing Concerns In Foreign Exchange Markets

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When the president of a European Central Bank made some indirect comments on the possibility of more monetary easing in the European Union, US President Trump immediately grabbed his smartphone and tweeted that “Mario Draghi just announced that more stimulus could come which immediately dropped the euro against the dollar, making it unfairly easier for them to compete against the US.”

Trump’s tweet added to the growing concerns in foreign exchange markets and investors are afraid that the trade war could turn to currency wars that can damage and result to unpredictable outcomes for the world’s economy.

One of the founding purposes of G20 is to prevent beggar-thy-neighbor currency policies. The Japanese presidency is expected to preserve G20 promise that currency manipulation will be avoided. Latest international tensions will be one of the difficult issues that world leaders will discuss in Osaka. G20 finds it unacceptable to use currency to gain a competitive advantage over other countries. Monetary policies can be changed for as long as the goal is domestic inflation.

According to Masatsugu Asakawa, Japan’s vice-minister of finance for international affairs, G20 understands the importance of maintaining separation between domestic monetary policies and currency interventions; however, it has become more difficult with Washington launching a trade war against China.

The US has repeatedly raised tariffs on its exports to China. China’s economy has slowed and the renminbi has weakened down as a consequence of the trade war. At the G20 meeting, US Treasury Secretary Steven Mnuchin seemed to suggest that failure to support renminbi can be construed as some sort of manipulation.

If you are trading your dollars for Euros, pesos or yen in preparation for your travel, make sure to know the most convenient spots for Currency Exchange to gain the best rates and lowest fees. There are online foreign currency exchange services that have better rates than banks with free same day transfers.