The Currency cold war - round three

The emergence of a currency war in which central banks and governments (including the US) purposely weaken their currency is already inevitable. Until this hefty FX markets conclusion came from Pacific Investment Management (PIMCO)

And it's not surprising given Trump's constant trump for the dollar. Ultimately, this will lead to government intervention in the US dollar exchange rate, and Wall Street is worried about that move.

These terms describe the situation as "the cold currency war, the third round", where escalation is about to happen.

PIMCO says the risks to the outbreak of a new currency war are extremely high. The main countries involved in the conflict are in a lull in 2018, preceded by a five-year currency clash.

Trump's calls to the FED to cut interest rates, along with the ECB, PBoC and BOJ signals to lighten monetary policy, fueled currency tensions. However, short-term US intervention is still unlikely - it is unclear how the Treasury is prepared, and green money is still sensitive to any monetary policy signals.

For the last time, the US has intervened in the FX markets in 2011 when the Japanese yen grew significantly due to the devastating earthquake in Japan. Not only large central banks will be able to participate in the next currency war. It is also expected to cut interest rates in South Korea, Indonesia, Chile and South Africa this week.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

Read more:

• Boeing 737 crashes in Iran as soon as it took off
• Iran with new threats, Trump repeals his statement from the Oval Office
• US bases in Iraq were hit by the Iranian national guard
• Rumors of an attack by Iran against a US base in Iraq
• The Phase I Deal signing ceremony will take place on January 15 in Washington