a competitive devaluation, also known as a currency war, represents a situation in which a central bank decides to manipulate its currency to make it weaker in order to boost the competitiveness of its economy.
The Federal Reserve released its minutes today and confirmed what many had suspected. The delay in tightening monetary policy was close but weakness in the global economy tipped the balance on the side of caution.
The Australian dollar was also in upbeat mood. Yesterday’s meeting of the Reserve Bank kept interest rates on hold at 2 percent (as widely expected) for the sixth month. The weakness in US fundamentals gave traders an excuse to buy the beaten down Aussie again.
Tomorrow will also mark the Bank of England’s October monetary policy committee meeting and release of their policy statement. No change in rates or QE is expected but the statement will be closely scrutinized
The US dollar recovered somewhat after sharp falls at the end of last week. The greenback pushed higher against the British pound and the euro both of which were suffering on weak fundamentals. USD/JPY also rallied upwards as risk appetite improved and the yen saw an outflow of funds.