Washington
could trigger a currency war in “two to three years” once it shifts away from
the trade war with China, according to Christian Gattiker, head of research at
Julius Baer Group.
He
told CNBC that the US Federal Reserve has been yielding to pressure from the
White House with a policy which could shape the dollar’s future.
“[The
Fed] moved 180 degrees from being in auto-pilot, tightening mode to cutting
rates and easing monetary policy, so I think there is a certain pressure on,” Gattiker said.
The expert
strategist added that the current geopolitical environment was creating new
objectives for the Fed, including the maintenance of an “orderly economic
environment.”
“With its new
mandate, [the Fed] is entitled to yield to this pressure, even in the greater
scheme of things with the trade war. So, I think a weaker dollar is warranted,
from a US perspective,” he said. “We might actually be turning from a
trade war situation to a currency war situation in the next two to three
years.”
Among other causes,
a currency war begins when a country deliberately depreciates the value of its
domestic currency in order to stimulate its own economy.
President Donald
Trump has recently accused other countries, China in particular, of
manipulating their currencies to gain “unfair” competitive advantages.
Last month the US
Commerce Department proposed a new rule to impose anti-subsidy duties on
products from countries that Washington sees as undervaluing their currencies
against the dollar to get an advantage in trade.
The rule could place
goods from Japan, South Korea, India, Germany and Switzerland at risk of higher
tariffs. Those countries, along with China, were all listed on the Treasury
Department’s currency report’s “monitoring list.” The list tracks
currency market interventions, high global current account surpluses and high
bilateral trade surpluses.
In its recent report,
the United Nations warned that elevated trade tensions could “spiral into
currency wars, making dollar-denominated debt more difficult to service.”
Source:
RT