31st January 2013
Nigel Green, CEO of the deVere Group, says: “The first month of 2013 has been characterised by its ongoing, and increasing, currency volatility – and this turmoil is likely to ramp up throughout the year as more and more countries are likely to adopt a ‘beggar thy neighbour’ policy and move, openly or not, to devalue their currencies in a bid to strengthen their own exports.
DeVere Group points out that the pound has hit a 13-month low against the euro and a six-month low against the dollar while Japan is also determined to devalue it currency.
“There are many indicators of a forthcoming currency war, but to highlight just two: The new Japanese Prime Minister, Shinzo Abe, effectively committing to a policy of devaluing the yen will be of significant concern for the likes of the US, China and India, amongst others, as it will give Japanese exporters an enormous trade advantage, and it may prompt these other financial powerhouses to seek their own devaluations. In Europe, Britain’s dismal growth figures have damaged the pound’s ‘safe haven’ status and prompted investors to buy euros, slashing the value of sterling.”
Green says investors need to re-evaluate their portfolios to consider any currency risk. “In response to the tumbling of the pound and the rising likelihood of a global currency war, it is of paramount importance that investors evaluate their portfolios sooner rather than later to ensure that they will be positively, rather than negatively, impacted by events. They need to be prepared and primed for the fallout. With volatility set to dominate the non-stop foreign exchange market, the largest and most liquid financial market in the world, now is the time to review investments,” he says.