The currency war is an economic contest triggered by the United States and involving countries around the world. Over the past decade, the United States has been preparing and planning for this war for a long time. As early as 2009, after the subprime mortgage crisis, the United States launched quantitative easing, through the issuance of a large number of dollars to stimulate the economy, while promoting other countries' housing prices, stock prices and other assets*** In 2015, the United States tried to raise interest rates, but this move did not achieve the expected effect and was abandoned halfway. However, the United States realizes that it is possible to win the currency war only if it loosens monetary policy further. As a result, after the outbreak of the global pandemic in 2020, the US dollar once again gained a rapid rally. However, surprisingly, in 2023, the dollar index will start to ** and non-US currencies will start **, which means that the US is in a difficult situation in the currency war.
Over the course of the past, the Fed has tried to raise interest rates several times to suppress other currencies. However, the latest data shows that manufacturing activity in the United States has continued to decline, and consumers are increasingly uncertain about the future economic development. This fact makes the Fed afraid to raise interest rates again, leading to a rapid ** of the dollar. At the same time, other currencies such as the British pound and the euro are rapid**, in contrast to the US dollar. However, the Japanese yen did not follow the ** of other currencies and remained fluctuating around the 150 mark. Interestingly, Japan has been buying US bonds heavily between June and August this year, seemingly intending to suppress the yen's depreciation. This suggests that Japan may be on the same side as the United States in the currency war, becoming an ally of the dollar.
At present, the U.S. economy is facing many difficulties, such as a decline in manufacturing activity and consumer concerns about inflation. The latest data showed that the US manufacturing PMI was just below 50 in November, indicating that manufacturing activity is in a state of contraction. In addition, the public's inflation expectations for the coming year reached 45%, and inflation expectations for the next 5 to 10 years are also as high as 32%。This shows a loss of confidence in the Fed and believes that it will be difficult for the US to keep inflation within the appropriate range of 2%. These problems have led to a widespread belief that the Fed will not dare to raise interest rates again, and the dollar will continue.
In this case, the dilemma facing the US economy will be further exacerbated. Treasuries are starting to start and the two-year Treasury yield is likely to rise above 5% again. Consumers are increasingly less confident about the future of economic development, which will have a negative impact on consumer spending and economic growth. In addition, the United States' large ** deficit and high dependence on imports are also important challenges for its economy. As the currencies of other countries weaken, the depreciation of the dollar will make imports more expensive, potentially further exacerbating the deficit and impacting the U.S. economy.
The United States and Japan, as advanced economies, play an important role in this currency war. However, the currencies of different countries have performed diametrically opposite. The US dollar has maintained its momentum for some time, but eventually fell into a situation. At the same time, the yen did not show the same trend as other currencies and remained fluctuating at a relatively stable level. This also means that although the United States launched a currency war, it was ultimately unable to win. From this point of view, there are likely to be many losers in the currency war, and the United States and Japan are likely to be one of them.
Through the observation and analysis of the current currency war, it can be seen that the United States is inferior in this war. Although the United States has made a lot of preparations over the past decade and has promoted the dollar's rally through quantitative easing, among other means, it has not been able to achieve victory in the end. Current data shows that the U.S. economy is facing deepening difficulties, with consumers worried about the future of the economy and manufacturing activity continuing to decline. These problems have made the Fed afraid to raise interest rates again, further exacerbating the trend of the dollar. At the same time, the yen has not followed the ** of other currencies, which may suggest that Japan has chosen to side with the United States in a currency war.
However, the outcome of the currency war will not only affect the United States and Japan, but other countries as well. Currency wars could lead to changes in the global economic landscape, with varying degrees of pros and cons. Therefore, countries should pay close attention to the progress of the war and formulate corresponding economic policies to deal with possible risks. At the same time, strengthening international cooperation to jointly solve the challenges facing the global economy is one of the keys to stabilizing the international financial market and promoting economic growth. Only in this way can we truly achieve a win-win situation.