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Currency Manipulation

January 23, 2013 – 5:59 pm

global1The Bank of Japan raised their inflation target to 2% from 1% and began a buying spree of their debt to try and drive down the Yen. This effort is pointed at escaping a multi decade of deflation.

However, at the same time it is clearly an effort to weaken their currency. Being a largely export economy that puts it on a collision course with the rest of the world.

Many economies see their way out of recession or slow growth through increased exports. Europe of course has the most to lose or gain from Japan’s exports and Germany, the largest economy of Europe with a very large part of their companies export oriented, will react.

Will that mean a currency war that will affect everyone? The U.S. is not an innocent bystander as we have been pushing our currency down as well with multiple ‘QEs’ and a huge debt burden. This cycle will end and it could get ugly before the end for all economies.

Still, that eventuality is in the future but with Japan’s recent move the future is getting closer.

Good Trading
Steve Peasley

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