The currency war has intensified in recent years, and the United States has been actively involved in it, showing great strength and influence. However, despite the initial momentum, the United States was ultimately unable to declare victory and instead found itself in trouble. At the same time, the yen, as an important currency, is likely to continue to depreciate as the dollar weakens.
Back in the aftermath of the subprime mortgage crisis in 2009, the United States began preparations for a currency war. Through quantitative easing, the U.S. not only issued large amounts of dollars round after round, but also injected these funds into the economies of other countries, pushing up assets such as housing prices and stock prices**. And in 2015, the United States began to try to raise interest rates to shrink the currency**, but the results were not satisfactory. As a result, the United States realized that only more easing could win the currency war. After the outbreak of the global pandemic in 2020, the US dollar flowed more violently into global markets. This was followed by another rate hike in the United States, significantly higher than in 2015. As a result, the euro fell below the 1:1 exchange rate, the pound hit an all-time low, and the yen** reached 150. The dollar seems to have won the currency war.
However, at the beginning of 2023, the US dollar will start to **, and non-US currencies will start to **. The Fed tried to raise interest rates again to suppress other currencies, but things reversed, and the U.S. economy bore the brunt of the damage. The Fed had to pause its rate hikes in the middle of the year and several times in the third and fourth quarters. Although the Fed still claims that it may raise interest rates again in the future, the reality shows that the US economy faces many adverse signals. The latest data showed that the US manufacturing PMI fell below 50 again in November, proving that the improvement in last month was only short-lived. At the same time, Treasuries ** again this Friday**, and the two-year Treasury yield is likely to exceed 5% again. Consumers' worries about the future are also increasing. According to the University of Michigan survey data, the American people's inflation expectations for the coming year reached 45%, and inflation expectations for the next 5 to 10 years reached 32%。This shows that the American people have lost confidence in the Fed and believe that it will be difficult to bring inflation back into the appropriate 2% range. Based on the above reasons, it is widely believed that the Fed has not dared to raise interest rates anymore. At the same time, the dollar was fast**, falling by 3% in November alone, and almost fell below 103 at its lowest. Surprisingly, however, the yen did not depreciate as expected, despite the fact that all other currencies were **. Although the pound and the euro rose by more than 3% in November, the yen retreated from 151 to 149 and remained around the 150 mark. Taking into account Japan's continued purchase of US bonds during June and August of this year, it seems that Japan has not taken measures to devalue the yen, and even seems to be deliberately suppressing the yen.
It is foreseeable that this currency war could lead to many countries becoming losers, and the United States and Japan are likely to be one of them. In the process, the United States was unable to overcome the situation and eventually got into trouble, while Japan's yen, while it did not depreciate, it did not rise like other currencies. This shows that currency wars are not a clear winner, and that each country has its own strategies and considerations, and the result is often a lose-lose situation.
Summary: The currency war, while initially appearing to be a U.S. victory, ended in defeat. The United States has been preparing for more than 10 years, trying to win the war through such means as quantitative easing and high interest rates. However, unfavorable signals from the US economy forced the Fed to pause its interest rate hikes, and the dollar began to **. At the same time, the yen did not depreciate as expected, but remained stable. This currency war has taught us many lessons, but it has also shown the great risks and challenges of monetary policy. We should recognize that war is not always the best way to solve problems, and that economic policy choices need to be approached more carefully and prudently.