Are You A Victim Of The Currency Wars?

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If you’re an expat, it’s likely you’re the victim of a hush-hush currency war without even knowing.

Currency wars are taking place all over the world as countries slash the value of their currencies to gain a competitive position against their rivals.

Skirmishes have taken place on at least two fronts in the past 24 hours.

The European Central Bank saw the value of the euro drop against the US dollar, pound, Japanese yen and Swiss franc by announcing a shock economic stimulus package.

While in New Zealand, the central bank surprised the markets by cutting interest rates to a record low of 2.25%.

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Economic casualties

The Reserve Bank of New Zealand blamed low inflation and a deteriorating global economy for the rate cut which triggered a slide in the value of the NZ dollar.

A currency war is a stand-off between two or more countries to devalue their currencies against each other.

The aim is to stimulate the home economy by making imports more expensive and home exports cheaper in the rival country.

The theory is this stimulates demand because consumers spend more money as goods become cheaper. The demand leads to more call on suppliers for goods and services, which increases GDP growth and jobs.

Currency wars are causing economic fall-out in unforeseen places.

Impact on expats

The economic backwater of Sweden has chopped interest rates and has signalled other ways to manage the economy are on the way in response to the ECB economic stimulus package.

Although Sweden is a member of the European Union, the nation retains the krona as a currency and is outside of the Eurozone.

“Controlling the economy is much like trying to control the weather,” a Swedish central bank spokesman said.

Expats are impacted if they are receiving pension payments or salaries in Sterling while living overseas.

A stronger pound means expat spending power increases against the local currency.

How the euro moves over the coming weeks against the pound will determine whether buying property in popular expat destinations such as France, Spain and Portugal becomes more affordable.

The Pound to Euro rate is 1.29.

See Bank of England daily spot rates for latest currency exchange information

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