Saudi Arabia warnings over "currency war"
Devaluation of currency by certain countries to make them more competitive in the global market has raised fears of a “currency war” — a move that Saudi Arabia says would have a negative impact on the world economy.
“This is not a healthy trend for world economy and trade exchange between countries,” said Finance Minister Ibrahim Al-Assaf when asked about the currency war. “Saudi riyal is directly linked with US dollar,” the minister said, adding the change in exchange rates would have a direct impact on the competitiveness of Saudi exports as well as on its imports.
Speaking to Al-Arabiya TV channel at the World Economic Forum in Davos, Al-Assaf said the issue would be discussed either at the upcoming G20 meeting in Moscow next month or in the next meeting in the US.
The currency war surfaced after the Bank of Japan announced plans to make open-ended asset purchases in an effort to re-inflate the Japanese economy, which recently slipped into recession.
Jens Weidmann, president of Germany’s central bank, criticized the BoJ for caving under pressure from newly elected Prime Minister Shinzo Abe.
Weidmann warned that the bank risks losing its independence, which could lead to a “politicization of exchange rates.”