Global currency wars have begun

 

Isabel Schnabel of the European central bank started it. In February the bank shows a chart, showing how much the euro weakened against the US dollar. Two months later, Bank of Canada's Tiff Macklem  grieved the decline of the Canadian dollar. US dollar had been soaring up a 7 per cent for the year, as a measure by Federal Reserve to combat inflation. And it started, one by one central banks elsewhere sent subtle signals to tame the relentless march of inflation and welcomed a strong currency which helps reduce import costs by boosting buying power abroad. This form of intervention is so rare that their jawboning alone moved markets. on June 16, two of them upped the ante: Switzerland and the Bank of England.

Switzerland surprised traders with the first-ever increase since 2007, sending the franc soaring to its highest level in 7 years. Hours later, the Bank of England announced a rate hike and signaled bigger hikes in the months to come. The value of currencies has even a larger part of the Inflation equation. Michael Cahill, Goldman Sachs Group, Inc economist, says he can't call a time when central banks of developed nations have targeted stronger currencies so aggressively.  Foreign exchange ( Forex) is calling this the " reverse currency War" - because countries sought the opposite, for more than a decade.

Central banks are striving to boost domestic buying power at the expense of exporters. A weaker currency meant domestic companies could sell goods abroad at more competitive prices, aiding economic growth. With the cost of fuel from food to appliances soaring, Strengthening buying power has  suddenly become more important.