Manipulate Currency Article For Free

The Chinese yuan has had a currency peg since 1994. The effect of the peg and the low currency is that Chinese exports are cheaper and, therefore, more attractive compared to those of other nations. By exporting more goods, China's economy thrives.

How currency manipulation can lead to a currency war. A currency war can break out after a country deliberately devalues its own currency and prompts another nation to do the same. This is also known as 'competitive devaluation'.

The basic approach is simply to change the size of the money supply. This is usually done through open-market operations, in which short-term government debt is exchanged with the private sector.

A government can manipulate floating rate by controlling the interest rate. To increase the exchange rate, ie the value of the currency, the government can increase its interest rate, which attracts foreign investors to save money in the country.

Currency manipulation refers to a country's interfering with the market's determination of the exchange rate of its currency in order to influence its trade balance, usually to favor its exports over its imports.

Devaluation occurs when a government wishes to increase its balance of trade (exports minus imports) by decreasing the relative value of its currency. The government does this by adjusting the fixed or semi-fixed exchange rate of its currency versus that of another country.

Currency prices are determined in two ways: fixed rates and floating rates. Fixed rates are pegged to a currency while floating rates move freely with market demand. Nations attempt to manipulate their currencies so that they remain strong and so that the demand for their currency is high in foreign exchange markets.

Cutting interest rates is the most direct policy for reducing the value of a currency. If the UK cut interest rates, then investors would be less likely to want to save in UK banks. This is because they get lower rates of return.