Currency manipulation occurs when a country deliberately influences its currency’s value to gain economic advantages. This practice can significantly impact global trade and the forex market. This article discusses briefly about what Currency Manipulation is, why countries get involved in , and much more.

What Is Currency Manipulation?

Currency manipulation involves a nation’s intentional actions to alter its currency’s exchange rate. Typically, this means devaluing the currency to make exports cheaper and imports more expensive. Such strategies aim to boost domestic industries by enhancing their competitiveness in international markets.

How Do Countries Manipulate Their Currency?

Governments and central banks use several methods to influence currency values:

• Foreign Exchange Interventions: By purchasing foreign currencies and selling their own, countries increase the supply of their currency, leading to depreciation.
• Monetary Policy Adjustments: Altering interest rates can affect currency value. Lowering rates may lead to currency depreciation, while raising them can cause appreciation.
• Quantitative Easing (QE): Implementing QE increases the money supply, potentially weakening the currency. While not always intended as manipulation, it can have similar effects.

Why Do Countries Engage in Currency Manipulation?

The primary motivations include:

• Boosting Exports: A weaker currency makes a country’s goods and services cheaper for foreign buyers, increasing demand.
• Reducing Trade Deficits: By making imports more expensive, domestic consumers may opt for local products, improving the trade balance.

Recent Examples of Currency Manipulation

In recent years, several countries have been scrutinized for manipulation:

• China: Historically, China has been accused of keeping the yuan undervalued to promote its export sector. While the U.S. Treasury Department did not label China as a currency manipulator in its 2024 report, concerns about transparency in foreign exchange practices persist.
  Reuters
• Japan: Japan’s government has expressed alarm over rapid yen devaluation and has indicated readiness to intervene against speculative and excessive currency movements. This highlights the country’s active role in managing its currency’s value.
  Reuters

Global Response and Regulations

International bodies like the International Monetary Fund (IMF) monitor and address currency manipulation. While there are guidelines, enforcing rules against manipulation remains complex due to the intertwined nature of global economies.

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