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Growing Concerns of a Currency War

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    Western Union Business Solutions senior market analyst Joe Manimbo on the outlook for currencies.

  • Duration 4:39
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Getting hammered today partly because the speculation coming out of meeting of G-20 finance ministers in Moscow today and other states are very very big.

As Japan contemplates a huge devaluation of the yen.

And the world braces for competitive devaluations to follow so where currency traders making -- -- in this market joining us now.

Joseph men in Raleigh -- -- unit business solutions senior market.

Analysts.

-- great to see it -- first of all let me talk about gold I know you're talking -- currencies but it's all related if if you believe there is a currency war afoot that were in the beginning stages of one -- sort of -- race to the bottom of currencies.

You would expect gold to go -- why is gold dropping like a -- Well I think part of the play in gold is the fact that the US dollar has strengthened on all this not concern about a potential.

A currency wars so any time you see the dollar appreciate that tends to put.

Downward pressure on gold.

But what's interesting is that we have seen the Euro hold its own you know we had debt.

-- several guests on the past week who -- months ago that the Euro was gonna drop as gold is dropping right now and it hasn't happened why not.

Well in the case of a single currency I think that's what's supporting this the Euro is the fact that -- ECB came out.

Rounds out last summer and they said basically they'll do whatever it takes to.

Keep the currency union intact so.

-- that's really helped put a durable floor under the Euro.

But I think as we've seen this week and -- the -- couple weeks some of that sun some areas but let out of the steam for the single currency.

We saw that in did -- this week that the contraction in the eurozone.

Proved to be deeper than expected so that's a concern -- -- start to see signs of stabilization.

In the real economy.

That's gonna keep talk alive that perhaps you -- and ECB rate cut this year.

And that's something -- and that's really limit the upside for the Euro.

-- but here here's the thing we don't often get because.

Things aren't necessarily fair and balanced in currency trading the Fed monetary printing fed fed policy pretty a lot of cash.

The QE -- has led to the dollar dropping over the past couple years.

The UK has had a similar money -- program so has the EU as you mentioned they said -- They'd print euros til infinity if necessary and yet they have stabilized where the dollar has not granted the past couple days have been down a bit.

But why is that why are not all QE programs the same when it comes to currencies.

Well.

That's it -- in that case of the Euro it's benefited from the fact that it a lot of investors are take a look at.

Central Bank balance sheets we've started to see.

Contraction and the eurozone balance sheet in terms of the ECB's balance -- -- that's been a source of strength for the Euro.

Indicates the Fed's -- -- maintain that they're gonna press on what this.

These easy money policies for quite some time until we see.

Signs of firm are firmer recovery taking hold so that's the main thing I think investors are really look at their balance sheets and has been -- -- Pressure on ECB's are right Japan is the focus of attention with the G-20 leaders in Moscow right now.

What's gonna happen -- it with the yen as a result of what the Japanese are doing.

That's that it -- thing I think the main issue with the Japanese currency is the fact that it's fallen so fast so rapidly.

That's the main concern it's not so much -- exchange rates I think.

Policy makers are okay with that level of sitting within its traditional.

Long run average but -- the fact that the NS.

-- and not some 20% since late last year that's the concern does that lead to.

Other countries doing the same things so.

That has a lot of it creates a lot of uncertainty and a lot of potential knock on effects a lot to see what these G-20 leaders have to say about the yen.

And where it goes from here OK finally Joseph what kind of currencies do you like right now what are you betting on.

Well some of the rising stars in the currency markets your kiwi dollar we've seen -- signs of improving economic fundamentals in New Zealand.

-- as results we've seen other kiwi dollar jump to some.

Seventeen month highs against the dollar and touched a record high against the British pound so that's -- to look out for -- -- -- even.

The dollar don't have the dollar -- we've got to us and fed minutes do next week.

If that shows any hint that maybe policy makers are.

Warming to the notion that they could roll back some -- easy money policies.

That would certainly be a source of support for the dollar a very personal it's all about me I'm going to Europe -- April led the dollar will be firm although I'll do better over there than if I went now.

Perhaps -- Syria and still again until we see recovery take hold in the Euro -- I think -- Europe may struggle to sustain meaningful gains Joseph men and no good to see Joseph thanks very much have a good holiday we -- appreciate -- you to thank you are.

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