Decades-high inflation has triggered a ‘reverse currency war’ as a soaring dollar leaves central banks scrambling to catch up

MarketsInsider/George Glover/9-27-2022

“Now, that strong dollar has sparked a scramble as global central banks look to strengthen their currencies and fight inflation through rate increases of their own. Last week, as the Fed hiked rates for a fifth time this year, a handful of other central banks — including those in the UK, Norway, Switzerland, and Indonesia — raised their benchmarks.”

USAGOLD note: One wonders how effective this sort of policy action is going to be. Raising rates in concert with the United States is kind of like the tide that lifts all boats. Relatively speaking, nothing happens. Japan took a slightly different route. It kept rates ultra-low and directly intervened in currency markets to prop up the yen. That maneuiver provided initial support (mostly psychological), but now the yen is trading at pretty much the same level it was before the BoJ’s action. Speculation is that Britain will take a similar course of action.  Currency speculators are likely to be unimpressed with either course of action.

US dollar-Japanese yen
(One month, inverted scale)
line chart showing the dollar yen rate over the past month
Chart courtesy of TradingEconomics.com

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