“Japan’s currency advanced versus the dollar for the third time in four weeks, while the euro climbed versus most of its peers,” according to a report by Bloomberg. “Hedge funds lifted bets on yen strength to the highest in more than three years, and pared wagers against the European common currency.”
“The greenback suffered as sentiment cooled for further currency-supportive interest-rate increases in the US amid sustained market volatility and weaker-than-forecast domestic economic data,” it further says.
If the yen strengthens beyond 115 per dollar and the euro gains toward $1.15, then the Bank of Japan and the European Central Bank, which benefit when their currencies depreciate, will come back into play, he further suggests.
A currency war, also known as competitive devaluation, is a condition in international affairs where countries compete against each other to achieve a relatively low exchange rate for their own currency. As the price to buy a country's currency falls so too does the price of exports.
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, rose 0.7 percent, its best week since November, as higher-yielding currencies slumped, including the Canadian dollar, Mexican peso and New Zealand dollar.
