Currency war, also known as competitive devaluations, is a condition in international affairs where countries seek to gain a trade advantage over other countries by causing the exchange rate of their currency to fall in relation to other currencies. Not only does the threat of a trade war impact the day-to-day of the currency markets, it is also related to a currency war where countries devalue their own currency so exports can be sold cheaper overseas in order to jumpstart the economy at home.

The US Dollar has contracted against every other currency in the G-10 basket since the inauguration of President Trump last year in January. US Treasury Secretary Mnuchin arrived at the World Economic Forum in Davos yesterday in order to prepare the attendees for President Trump’s ‘America First’ policy on a global stage.

The matter of central banks and/or governments, purposely manipulating currency markets has been a hot topic over the last year. The practice of suppressing currency rates to maintain a competitive advantage has commonly been referred to as a “race to the bottom”, where global economies have been engaged in huge monetary easing since in order to maintain their competitiveness and attempt to boost growth.