Currency Wars: which currency wins by losing the most value?

Economies benefit from a low currency because it makes their exports cheaper for others to buy. It also makes imports more expensive, which forces the economies to produce more domestically and buy less foreign products. It's a delicate balance, no country wants their currency to be considered worthless and actually have the population lose confidence in it (which has happened in the past in countries such as Germany and Argentina), but at the same time no country wants their currency so high that their products are too expensive for others to buy.

Recently many countries have tried to bring down their currencies from China to the US and Canada. This can be done sometimes with monetary policy by lowering interest rates, adjusting foreign reserves, or simply by talking down the currency, indicating that it is too high and implying policy action could be taken to bring it down. Recently we have heard Trump target several different currencies in attempts to bring down trade imbalances where they import much more than they export with these countries. We know that China exports much more than they import to most countries so they benefit from and desire a low currency, which can easily be manipulated with their government. We also know that Canada has tried to talk down their currency relative to the US dollar and the last action on interest rates was a cut, with another cut possible to try to stimulate exports. The British Pound has fallen to multi-decade lows since the Brexit vote, although this has shown its stimulative effects with their market at all-time highs. Finally, the Euro has also fallen, benefiting the stronger countries such as Germany, which can export at much lower relative prices than if they had their own independent currency, while hurting the weaker countries like Greece and Italy who are dragging it down, but not as low as their own independent currencies would be and enough to stimulate their struggling economies.

In the end talk is just that, talk, and action will drive currency markets. The US has already raised rates twice with more expected this year and next, while Canada and Europe are still far from being comfortable with rate increases and are still considering cuts. Therefore, all rhetoric and jawboning aside, unless we see some unexpected events don't be surprised to see the US dollar increase against the Canadian dollar and Euro.

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