A warning by Poland’s central bank could be the spark that sets off a currency war among the European Union’s eastern members.
The statement that an overvalued zloty could imperil Poland’s economic recovery took the market by surprise earlier in the week and could prompt similar interventions in the region as policy makers seek to boost their export appeal, according to Rabobank’s London-based strategist Piotr Matys.
“Poland, the Czech Republic and Hungary could be on the brink of a currency war with each other and countries from other regions, mainly Asia,” he said. Nations “will be fiercely protecting their share of global trade and try to increase it at all costs as global supply chains are transformed significantly in the post Covid-19 world,” he said.
The currencies of all three countries are among the top ten emerging-market gainers this quarter. Hungary’s forint leads, posting a 5.9% surge against the dollar and a 4.1% jump against the euro.
While the rebound is welcome, the gains can go too far.
The coronavirus pandemic severely disrupted the global flow of goods, handing the manufacturing hubs of central and Eastern Europe a valuable chance to increase their share in trade at the expense of Asia, according to Matys.
The Polish central bank “is not alone” in preferring a weaker currency as a means to up their game in trade, Matys said. “Expect similar verbal interventions from other central banks, especially those whose currencies are relatively less competitive than their peers.”
Today, the Alliance for Chemical Distribution (ACD) welcomed 666 members and industry leaders for its highly anticipated 2024 Annual Meeting held in La Quinta, California.
View ArticleThe National Retail Federation still expects steady sales growth for the winter holiday season despite contradictions in the latest economic indicators, NRF Chief Economist Jack Kleinhenz said today.
View ArticleDonald Trump’s victory in the US Presidential Election is ‘a step in the wrong direction’ for international trade as importers fear another spike in ocean container shipping freight rates.
View ArticleIndustry updates and weekly newsletter direct to your inbox!