Timing is at the heart of currency war

Lombard Odier's Stéphane Monier says EM's have to manage the rate at which they raise the value of their currencies, or else risk destabilising their economies.

For decades emerging economies have geared themselves towards exports. This made perfect sense as there was always a hungry customer in the US and the developed world. In fact, so successful has this policy been that in 2009 China surpassed Germany as the world’s biggest exporter. However, China’s burgeoning size relative to its client base has now strained this export model to breaking point. The key to the emerging economies’ export success has largely been a competitive currency. They limited the appreciation of their currencies by mimicking monetary policy in the US, while at the ...