G-20: QE does not equal currency wars

Day approaching for free floating CNY?

Another important event is China's talk of widening the trading bands for its currency and liberalizing the CNY may be sped up. A free floating Chinese currency – if and when it happens – would be a very significant addition to forex markets given China is the world's second largest economy. CNY would no doubt quickly become a major reserve currency and would support China becoming a major financial center. USD/CNY would eventually become one of the most heavily traded currency pairs. But liberalization is likely to be many years away as China, like most other countries, doesn't particularly want a strong currency at this point, which would risk chocking off exports. 

However, it was clear that there is plenty of tension simmering not that far beneath the surface at the G-20. South Korea is still very unhappy over Japan's re-inflation policies and there is deep division between the U.S. and Germany regarding fiscal policy. Many emerging market countries with more robust economies remain concerned over the distorting effects of aggressive QE activity from developed nations.

About the Author
Justin Pugsley

Justin Pugsley is the forex and gold markets analyst for New Zealand-based trading platform provider MahiFX. He is a keen student of markets, economics and history. Prior to working with MahiFX, Justin worked for a number of leading media organisations such as Thomson-Reuters and Dow Jones/Wall Street Journal.

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