Currency wars: Pressure point
Mar 1, 2013
Latin officials are struggling with the fallout of capital inflows in an era of easy money. The risk of financial instability may be growing
By Taimur Ahmad and Katie Llanos-Small
When finance ministers of the Group of 20 nations gathered in Moscow in February, exchange rates topped their agenda. Officials sought to ease mounting fears that the world’s biggest economies are locked in a race to the bottom to devalue their currencies.
“We will not target our exchange rates for competitive purposes,” the G20 ministers said in a communiqué after their summit. “We will resist all forms of protectionism and keep our markets open.”
Within days of their statement, the G20’s wish for a shift in financial market perceptions appeared suddenly – and alarmingly – to have come true. For the first time in months, investors turned sharply from speculating on an outbreak of so-called currency wars to worrying anew about financial crisis in the eurozone, as a fresh bout of political turmoil took hold in Italy.
Risky assets – including emerging market currencies, stocks...
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