IronFX’s Gittler: ‘Currency Wars Are Still With Us’

Tuesday, 12 Mar 2013 07:54 AM

By Dan Weil

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The currency war precipitated by global central bank easing is still going strong, says Marshall Gittler, head of currency strategy for online trading firm IronFX.

Last week, five important central banks met. None changed its policy stance.

“Yet . . . the meetings made it clear that the ‘currency wars’ are still with us, and clarified each central bank's stance in these wars,” Gittler writes in a blog for CNBC.

Editor's Note:
This ‘Third War’ Will Be the Most Destructive in History, Warns Pentagon Adviser

“It's not yet clear who will ‘win’ the wars by weakening their currency the most, but the U.S. seems set to be a ‘loser’ by having its currency rise in value against the others.”

So far this year, the dollar index, which measures the greenback’s value against six other currencies, has risen 3.8 percent — almost reaching a seven-month high.

Last week’s meetings showed that four of the central banks are mulling more easing — the Reserve Bank of Australia, Bank of Japan, Bank of England and the European Central Bank, Gittler says. And the fifth, Bank of Canada, appears to be leaning that way.

“For forex traders, the important point is that all these central banks have both reasons to ease further and room to ease further: a motive and a weapon, one might say,” he says.

Meanwhile, the Federal Reserve’s discussions center on when to reverse its easing rather than whether to implement more.

Thus, “I would expect to see the dollar continue to rally as other countries loosen policy further,” Gittler writes.

Others are bullish on the dollar too.

“There are still some headwinds in the U.S. economy coming from its fiscal outlook, but the recent data suggested the economic recovery is probably robust enough to accommodate the fiscal setback,” Jane Foley, a foreign-exchange strategist at Rabobank International, tells Bloomberg.

“That should be positive for the dollar.”

Editor's Note: This ‘Third War’ Will Be the Most Destructive in History, Warns Pentagon Adviser

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