Will A Looming ‘Currency War’ Also Lead To A Global Trading War?

Category: Markets / Finance / Feb 15, 2013 4:12PM EDT
Wall Street edged higher in early trading after data showed that consumer sentiment rose in the U.S. and manufacturing activity expanded in the New York region. Also in the spotlight, finance ministers and central bankers from the Group of 20 countries are meeting in Moscow against a backdrop of rising currency tensions. Jonathan Corpina, Senior Managing Partner at Meridian Equity Partners, will weigh in about the latest positive data coming out of the U.S., as well as if a possible currency war could also lead to trading wars. Consumer sentiment in the U.S. jumped in February, rebounding after a disappointing showing the previous two months. The University of Michigan preliminary index of consumer sentiment climbed to 76.3 this month from 73.8 in January, beating analyst expectations of a projected rise to 74.8, according to the median forecast in a Bloomberg survey. G20 officials struggled to find a common form of words on currency manipulation ahead of a summit on Friday where divisions within the group over growth versus austerity looked set to flare back to life. A draft prepared for the Group of 20 finance leaders will omit part of this week’s Group of Seven statement declaring fiscal and monetary policy must only be used for domestic economic aims, according to Reuters. Central banks in Japan and the United States have policies of buying government bonds to boost credit to the economy, and Japan's government also wants to additionally stimulate the economy fiscally. Such policies have led to a weakening of the dollar and the yen, making exports of these countries more competitive, in what some policy makers refer to as "currency wars". They G20 Summit will take place in Moscow for the first time this weekend, and officials are expected to discuss whether the loose monetary policies of the U.S., Japan, Britain and the euro zone depart from the group's commitment to market-driven exchange rates.