Weakening yen 8216 could fuel currency war 8217

A currency war could begin as a result of the weakening of the yen.


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By :  ,  Financial Analyst

The weakening of the yen against the dollar is likely to fuel talk of a currency war.

With the Japanese currency down to a fresh four-and-a-half year low against the dollar of 102.15 yen this morning (May 13th), the Nikkei index has been experiencing strong gains.

But Chris Towner, director of FX advisory services at foreign currency specialists HiFX, stated the break through the psychological 100 barrier could lead to countries becoming increasingly concerned about the impact that a strong currency has on the domestic economy.

Japan has been accused of deliberately weakening the yen against the dollar in order to support its economy.

Mr Towner said: "Japan should capitalise on the fact that their products have become 30 per cent cheaper to reinvent what made them so successful in the 80s and export growth back into their domestic economy."

Speaking to Reuters last week, global head of currency strategy at Brown Brothers Harriman in New York Mark Chandler stated breaking the 100 barrier has "released the animal spirits".

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