The Dollar Should Be The First Source Of Currency War.

Recently, it is directly affected by the depreciation of US dollar index.

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The Japanese Central Bank announced in October 5th that the interbank unsecured overnight lending rate will be reduced from 0.1% to zero to 0.1%, thanks to the sharp appreciation of the yen and the weakening of exports and the slow down of economic growth.

This is not only the first time that the bank has resumed its zero interest rate policy since 2006, but also intervened twice in 1 months to curb the appreciation of the yen.

Unfortunately, according to statistics, the US dollar plunged by about 2% in from October 1st to 8th against the yen.

At the same time, South Korea and Brazil also released signals of possible action.

The South Korean side said that in view of the possible volatility of the foreign exchange market, the government was prepared to intervene when necessary.

Brazil's finance minister has stated that governments are lowering their exchange rates to enhance their economic competitiveness. Brazil will never sit idly by.

In the long run of domestic currencies, some central banks have been sending signals or intervening in exchange rates.

Inspired by the US, China is considered the first "root" of this possible currency war.

Timothy Geithner, US Treasury Secretary, delivered a speech on 6 th East China time criticizing China's export growth to stimulate economic growth, which led to the deterioration of the US economy.

He said that China's exchange rate policy may trigger an international exchange rate war, which is bound to curb global economic recovery.

He also called on IMF to take more radical measures to the Chinese government, using the organization's governance and restructuring to promote the pace of RMB appreciation.

In response, Premier Wen Jiabao responded on the 6 day at the Sixth China EU business summit in Brussels. European leaders and business circles should not take part in the oppression of RMB appreciation.

He stressed that trade imbalance is a structural problem under globalization and should not be politicized.

In fact, since the reform of RMB exchange rate formation mechanism in 1994, the effective exchange rate of RMB has appreciated by 55%, while some major currencies have depreciated.

In July 2005, the RMB exchange rate formation mechanism was further deepened. Up to now, the RMB appreciated by 22% against the US dollar, during which the US trade deficit with China increased by 30%.

In fact, the United States used to force Mark's appreciation and yen appreciation in the west, but it did not change the US deficit problem.

The depreciation of the US dollar is the direct cause of the currency war, but in the final analysis, the most essential reason is that the market expects the Federal Reserve to start the second round of quantitative easing, and finally lift the expected low US dollar in the medium and long term.

The fact is that at present, many countries tend to rely on the depreciation of their currencies to boost the economy, but as a result, hedge funds have poured into commodities, gold and other assets, leading to inflation expectations. On the other hand, after the financial crisis, the policies of various countries tend to be short-term.

This way not only did not improve the balance sheet, but expanded the debt level by means of quantitative easing and other incentives.

The ultra loose monetary policy pushed by the Federal Reserve and the European Central Bank is pushing the world towards "mixed up".

The huge liquidity injected by the fed to restore the economy is practically useless for the US economy.

And the resulting moves by countries to compete to limit their currencies' appreciation may trigger more capital controls, and finally fail to win a winner.

At the same time, the depreciation of the US dollar is different from the past. It has changed from the past obedience to the opposition of the whole world at present. The fact shows that the position of the US economy in the world economy has begun to be challenged.