The ECB is still struggling to keep Greece above water, while China is dealing with its market crash. The surprise yuan devaluation has agitated global markets further. When the People’s Bank of China (PBOC) decided to weaken its currency to get back on the right track, the USD, JPY, and EUR have been forced to adjust accordingly. Anytime a nation deliberately interferes with its currency, ripples are sent through the markets. China, with its 1.9% devaluation, has made waves. Last year, it was Europe in this position, and in 2013 it was Japan’s Abenomics with a weak yen at the helm of its policy that took center stage. With China’s recent move, countries all over are engaging in competitive devaluations to protect currencies. With an increasing number of countries being involuntary drawn in and a few apparent losers already, this is shaping up to be quite a turbulent currency war.

All wars have collateral damage, but it is too early now to realize the full extent of the ruin. Countries like South Korea have maintained a rather healthy economy but are far more vulnerable when it comes to currency. Korea, despite its attractive slew of technologically advanced exports, presents a less than ideal trade situation with its strong won. Present and prospective traders of Korea become apprehensive when the currency of a partner in trade hikes the prices for the consumers in its respective countries.

Switzerland is still in recovery but in deep deflation with negative interest rates. A simple solution might involve it printing more money, but that would counter the existing policy of its central bank. In the Western hemisphere, Canada has been slashing rates and knocking its currency down to historically low levels. This was intended to combat its exchange rate problems, but it will likely lead to asset bubbles and inflation in the very near future. America, with its recent $2 trillion market cap loss of the S&P 500, is taking correctional measures in its stock markets to prevent extended periods of volatility.

China’s closest partners in trade, excluding major powers, are mainly concentrated in Southeast Asia. This region, perhaps bearing the brunt in the early stages of the 2015 currency wars, is adjusting the most in response. Currencies in the region are taking the defensive while commodities continue to slide-Vietnam and Thailand are both favoring depreciation and falling currencies. Malaysia, while following suit, is more concerned with resolving volatility through foreign reserves intended to manage the currency. 

China, in hopes to internally bolster exports, has triggered a worldwide competition among all types of economies. The prize is outpacing the inevitable economic contraction it will be facing quite soon. The problem is no one really wins a currency war. There are some clear losers, a few who come out mostly unscathed, but above all, there is irreversible collateral damage.

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