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The Currency War

August 3, 2022

Published in Kyunghyang
(South Korea) on 18 July 2022
by Park Soo-jin (link to original link to original)

Translated from by Anukrati Mehta. Edited by Wes Vanderburgh.

A common feature of the four global currency wars since the 20th century is the competition of "devaluation of currency (increasing exchange rate)." As the gold standard system was virtually abolished immediately after the Great Depression, countries like the United States intervened in the foreign exchange market and focused on enhancing export competitiveness by lowering the value of their currencies. The same was true after the declaration ending gold convertibility in 1971 (Nixon's shock) and the global financial crisis of 2008. Even in the Plaza Accord in 1985, lowering the dollar's value against the yen was a key issue.

Since the beginning of the year, the pattern of this currency war, which has existed since World War II, has changed. Goldman Sachs, an American investment bank, analyzed in February that a new phenomenon is emerging in which central banks of each country are self-valuing their currencies to offset inflation-induced prices. This is the so-called "reverse currency war."

The United States has pulled the trigger. Surprised by record inflation, it has raised interest rates three times this year. Following the "Big Step" (a 0.5% increase in the benchmark interest rate) in May, the Federal Reserve took the "Giant Step" of raising it 0.75% all at once in June. The possibility of an "Ultra Step" (a 1% increase) was also predicted in July. This is the most aggressive increase in the last 30 years.

Other central banks are also being pushed to raise their interest rates. They have already reluctantly had to raise rates, as the price of imports rose due to a strengthened dollar and supply chain instability. According to the Financial Times, central banks in 55 countries raised interest rates by 0.5% 62 times in three months since April and 17 times in July alone. This is the most paroxysmal rate hike since the 2000s.

The future is more of a problem. International Monetary Fund Managing Director Kristalina Georgieva said yesterday that high prices will not begin to cool down until next year. Japan, China and the European Union, which have not yet joined the others with interest rate hikes due to the possibility of an economic contraction, are likely to make a fifth currency war a reality.

The stabilization of the exchange rate is essential for the stable operation of the government's policies, as well as for the prices of goods and services for the working class and business activities. Korea has also raised interest rates five times since August of last year, but the won-dollar exchange rate is on an upward trend. U.S. Treasury Secretary Janet Yellen is visiting Korea today. We hope that practical exchange rate stabilization measures, such as the Korea-U.S. currency swap agreement, will emerge from this meeting.

세계대전 이후 수십 년간 이어온 이 같은 통화전쟁의 양상이 바뀐 것은 올해 초부터다. 미국 투자은행 골드만삭스는 지난 2월 “인플레로 인한 물가 고공행진을 잡기 위해 각국 중앙은행이 자국 통화를 스스로 평가절상하는 새로운 현상이 나타나고 있다”고 분석했다. 이른바 ‘역(逆)통화전쟁(reverse currency war)’이다.

방아쇠는 미국이 당겼다. 기록적인 물가 상승에 놀라 올 들어 세 차례나 금리를 인상했다. 5월 빅스텝(한 번에 기준금리 0.5%포인트 인상)에 이어 지난달엔 한꺼번에 0.75%포인트를 올리는 ‘자이언트스텝’을 밟았다. 이달엔 ‘울트라스텝’(1%포인트 인상) 가능성도 점쳐진다. 최근 30년을 통틀어 가장 공격적인 인상 기조다.

다른 중앙은행들도 금리 인상에 내몰리고 있다. 가뜩이나 공급망 불안으로 인한 물가 폭등에 강달러로 수입물가까지 오르니 울며 겨자 먹기 식으로 금리를 인상하지 않을 수 없게 된 것. 파이낸셜타임스(FT)에 따르면 세계 55개국 중앙은행은 지난 4월부터 3개월간 62번의 0.5%포인트 금리 인상에 나섰다. 7월에만 17번이다. 2000년대 이후 가장 ‘발작적’ 릴레이 금리 인상이다.

앞으로가 더 문제다. 크리스탈리나 게오르기에바 국제통화기금(IMF) 총재는 그제 “고물가는 내년에야 식기 시작할 것”이라고 진단했다. 아직 경기 위축 가능성 때문에 금리 인상 대열에 끼지 않고 있는 일본과 중국, 유럽연합(EU)까지 가세해 ‘제5차 통화전쟁’이 현실화할 가능성이 높다.

환율 안정은 서민 물가와 기업 활동, 정부의 안정적 정책 운용에 필수다. 한국도 지난해 8월부터 다섯 차례 금리를 인상했으나 원·달러 환율은 천장 없는 상승세다. 마침 재닛 옐런 미국 재무장관이 오늘 방한한다. 한·미 통화스와프 체결 등 실질적 환율안정 방안이 나오길 기대해본다.

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