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Currency War: Winners And Losers

ByThe National Bank of Canada
Published 08/23/2012, 02:21 AM
Updated 05/14/2017, 06:45 AM

Mantega declared that an international currency war has broken out, his country seems to be weathering that war quite well, with a 10% currency depreciation in real terms. The eurozone has also improved its relative competitiveness against most regions thanks to a slumping euro, coupled with subdued inflation. That helped the eurozone post, on a seasonally-adjusted basis, current account surpluses for eight straight months to June this year. The improvement in competitiveness doesn’t mean that the worst is over for the common currency area. Huge regional imbalances remain problematic for the zone’s stability.
Currency war Winners and losers
As today’s Hot Charts show, while 16 of the 17 euro area countries have seen real currency depreciation over the last couple of years, those pale in comparison to Germany’s real depreciation. With its relatively low inflation rate, Germany has been able to increase the competitiveness gap with most of its fellow eurozone
members. That suggests more should be done by European leadership to achieve convergence within the zone. Boosting German demand and inflation via expansionary fiscal policy may be a good way to start.

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