September, the dollar depreciated again to affect the world’s nerves. Market expectations the Fed will once again introduce quantitative easing monetary policy, the release of dollar liquidity to the market, non-US currencies rose across the board.

The foundation of the current instability in the global context of economic recovery, the market trends so that governments that are dissatisfied, have taken or intend to take measures to curb currency appreciation, to ensure that the domestic economic recovery. Bank of Japan can be described as the largest action, from direct intervention to cutting interest rates, purchase of assets, providing the market with a lot of yen liquidity, it seems that the methods can be used, but with little success. The ECB has always been shy to comment on the currency markets, but ECB President Trichet had to maintain a strong U.S. dollar once again expressed its hope that the remarks. This round of the dollar, emerging market countries have a great impact, Brazil, Korea and other emerging economies are also taking measures to prevent hot money inflows, currency appreciation inhibition.

Now the market is concerned that the Federal Reserve’s second quantitative easing policy means the dollar will fall into an endless decline? Which is soon to be held in Seoul, will the G20 summit to discuss the issue on the exchange rate and avoid the exchange rate of the world into disorder, trade disputes?

First of all, the U.S. dollar, we do not think it will immediately enter the ongoing decline. The Fed is indeed taken into dollar liquidity to the market measures to avoid the U.S. economy into a Japanese-style deflation. Crisis, the Federal Reserve to take all the measures are from the U.S. Federal Reserve Chairman Ben Bernanke as a scholar during the Great Depression of the research results. Bernanke believes that the last century the Great Depression of the thirties caused mainly due to lack of demand, while deflation is expected to lead to an important reason for lack of demand. To avoid deflation, interest rates must be taken quickly, the purchase of assets to free up liquidity and stabilize financial markets, currency devaluation, inflation targeting and a series of measures. Currently, the U.S. economy faces the risk of deflation, the Fed is also a step by step to do so. Since not many can learn from historical experience of success, especially the United States the world’s largest economies have a problem, will not be able to rely on other countries to assist, therefore, methods must try all policies, thereby causing fluctuations in the market are of the disorder inevitable. But the Fed will not ignore these markets overreact to any new policies need to continue to explore, market feedback, and then modified the process. At present, the market response is excessive, and whether the problem is corrected.

On the other hand, not only the United States, now the world’s major developed economies are facing the problem of insufficient demand, countries to avoid falling into a Japanese-style deflation, will take various measures to save their economies. Especially the United States the world’s largest economies to take some of the New Deal, if somewhat effective, it will certainly be other countries to follow. The policy of small countries greater flexibility and efficiency of administration more countries, the so-called “small boat U-turn” is the truth. Therefore, the United States after the quantitative easing, do not rule out the United Kingdom, Japan and even European countries to take similar initiatives. So, this assert G7 currencies, the U.S. dollar against major non-US currencies continued to fall too early.

For emerging economies, especially China, the U.S. dollar’s depreciation trend should be continued. Although the current global economic situation is still the United States as the leading countries have more or less on the U.S. economy and the dependence of some relevance, the U.S. position as a short-term end market demand is also difficult to change, but the emerging economies continued rapid development , is building the driving force behind demand growth outside the United States. This will change the future prospects of the global economic situation, the decision between long-term economic growth in emerging economies currencies will remain strong. It is also a long-term differences in economic growth, the amendment process.

In summary, short-term U.S. dollar against the euro, yen and other currencies continued to depreciate, but the new U.S. monetary policy, a strong reaction in the market, between the developed economies, exchange rate fluctuations due to economic stability may not continue, but Europe and Japan lack of economic growth potential, the strength of its currency has always been constrained, in addition to the debt crisis in Europe has not fully healed, the U.S. dollar against the euro, the yen may still be the future volatility is unlikely to continue unilateral trend.

Exchange rates among developed countries because of the establishment of long-term trend is not unilateral, the occurrence of war or a trade war, the possibility of the exchange rate is relatively small, then the problem is concentrated in the developed countries led by the U.S. and among developing countries led by China. Globalization, no country can not be isolated from global markets, and the benefit, while confrontation can only hurt the truth we know very well. There will always be disputes, disputes in the country just want to fight for more benefits as much as possible, and all things dog in the manger is not dry.

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