As central banks around the world have implemented major quantitative easing (QE) campaigns over the last several years, many experts warned that the nations’ currencies would suffer.
But for the most part, that hasn’t been the case, according to The Wall Street Journal.
The Federal Reserve started its QE in November 2008. But since mid-December of that year, the Dollar Index, which measures the greenback against six other major currencies, has actually risen slightly — 1.3 percent.
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The British pound is little changed against the dollar since the Bank of England began its QE2 October 2011. QE hasn’t hurt the euro either.
Currencies were expected to decline on a supply/demand basis, because QE increases currency supply. The expectation also was that QE would trigger inflation, which generally pulls a currency down.
But with so many central banks easing at once, supply hasn’t been an issue. And economies have been weak enough to keep inflation from rearing its ugly head.
"If you don't have inflation then you haven't diluted the value of the currency," Elsa Lignos, currency strategist at RBC Capital Markets, tells The Journal.
Some economists and government officials are worried that the global easing will turn into a currency war, as nations seek to devalue their currencies to boost exports.
In particular, German and Chinese officials expressed concern about the Bank of Japan’s decision to adopt a new QE program this week.
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