George Soros believes that the Euro will remain strong while the world’s other currencies weaken. He spoke at the World Economic Forum in Davos, Switzerland earlier this week. Soros also warned this week of a possible impending currency war throughout the world.
Soros said that although the European economic crisis isn’t over yet, the worst of it is past. He predicts that the next two years will be “tense” ones for the euro. According to Soros, the austerity policies proposed by Germany are the wrong policies to be following right now. He said if Germany does convince the rest of the euro nations that they should tighten up on their policies, then the euro will appreciate while countries in other parts of the world expand, which could result in a currency war.
He pointed to the stability the world’s currencies have enjoyed in recent years, but he said the current economic climate will likely lead to more volatility. BusinessWeek reports that last year Soros said that Germany’s policies could cause tension among the European Union nations and possibly even destroy the union.
The Japanese yen is already beginning to weaken against the dollar. Monday it fell to its lowest level since June 2010. Some world leaders are blaming much of the yen’s devaluation on Japanese Prime Minister Shinzo Abe. According to Soros, Japan will only be able to devalue its currency according to what the U.S. will tolerate.
He also said the euro is poised to continue its upward momentum as the yen falls. He said he doesn’t know “how far” things will go, but he can see “which way they are going.” He believes countries should avoid contradicting other countries in the world, which would push us toward a global currency war.
Meanwhile the U.K. is also attempting to rebalance its economy. Policy makers are looking for ways to spur exports and investment while reducing debt activities. They say the pace of the rebalancing will set the tone for the nation’s economy. A report in The Wall Street Journal said there are two opposing possibilities in how the U.K. economy rebalances. If companies and households pay off their debts slowly, the pound would remain weak, but the effects would be otherwise relatively small. However if they pay off their debts quickly, domestic spending could slow so that national saving will increase.