May Commentary - A Short Note on Currencies

Having a strong currency was once a goal of many nations. Now, it seems many countries actively try to debase their currencies as much as possible with artificially low interest rates and abnormal amounts of quantitative easing. Why would a country want to devalue their currency? In a time when global economies across the world are struggling to grow, a weak currency allows countries to export more goods at better prices.

Continually relying on exports for a large percentage of an economy's growth can be a risky game. Domestically, a devalued currency could lead to little (or no) wage growth. Low wage growth is a very serious problem and can set an economy back many years as consumers have to cut spending to meet their every day needs. 

I would argue that over the long term, having a strong currency puts a country in a much more powerful and sustainable position. Unfortunately, we live in a very short term based global economy these days and everything is being done for the here and now so it isn't surprising that currency valuations are being "manipulated" to help show some sort of growth. We just need to be careful and understand where this growth is coming from.