Currency manipulation is an unfair trade practice which can lead to devastating effects on trade flows as
Question:
Currency manipulation is an unfair trade practice which can lead to devastating effects on trade flows as well as trade imbalances amongst trading partner nations. Currency manipulation is a deliberate practice by nations to devalue or revalue their currencies by off fair market value margins to gain unfair advantage over their trading partner states. Navarro (2012) reported that the USA owed China approximately three trillion dollars, with more than fifty thousand American factories having transitioned to the Chinese territory: thanks to currency misalignments and illegally subsidized exports which flooded the USA market from China following the ratification of the 'policy of engagement' in 2001, which saw China join the World Trade Organization. When economic pressures of demand and supply influence a nation's currency change in value, this equals to currency depreciation or appreciation.Nations witness this trend in a free-floating currency environment. However virtually all nations, including those that employ the free-floating forex regime intervene in the forex market to cushion their currencies from devastating dangle. That is when the other three-forex regimes of: fixed, pegged, and managed float come to fore. Do countries engage in currency manipulation at all? Discuss. Provide examples to support your answer