Do Exchange Rates Still Matter?
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Publication Date:
October 28, 2010
Along with managing heightened global macroeconomic risks, governments and corporations now face brewing currency wars and increased exchange rate volatility. While full-blown currency wars may be avoided, volatility will not. Driving the foreign exchange volatility in the short term will be continued fluctuations in sentiment and interest rates. In the medium term, current account imbalances should dominate movements in exchange rates. And in the long term, inflation and productivity are the main factors that likely push up the value of emerging economies' currencies.
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