'Currency wars' back on international agenda
'Currency wars' back on international agenda
The currency issue has been revived by Japan and is beginning to cause concern in some quarters in Europe.
France will raise the issue of the strengthening euro at a meeting of euro zone finance ministers on Monday. Then a meeting of G20 ministers is likely to focus on the big picture in Moscow on Friday and Saturday.
Euro zone finance ministers, meeting as the Eurogroup in Brussels today, hold their first session under their new president Jeroen Dijsselbloem of the Netherlands, against a background of calmer conditions for their debt crisis.
Dijsselbloem has taken over from Jean-Claude Juncker of Luxembourg who chaired the meetings throughout the global financial crisis and then the euro zone debt turmoil.
This meeting is not expected to take any decisions either on help to debt-stricken Cyprus in the run-up to next week's presidential election there; or on the creation of a banking union, still the subject of intense negotiations.
The main focus of discussion is likely to be the rise of the euro: French Finance Minister Pierre Moscovici called last week for a debate on the euro's exchange rate.
France is worried that the strengthening euro makes euro zone exports look more expensive and could undermine government efforts to improve the competitive position of French industry and services. The Socialist administration is already grappling with weak growth and a big trade deficit.
France wants the euro zone to arm itself with a policy for the foreign exchange rate. The external value of the euro should not be left to market forces of the moment, French President Francois Hollande has argued.
Germany and the European Central Bank however, are keen to nip the debate in the bud, arguing that the European currency is not over-valued.
The ECB has statutory independence in managing monetary policy and its main obligation is to ensure price stability.
While the exchange rate is one of many factors affecting inflationary pressures, any targeting of an exchange rate would potentially interfere with the money supply and therefore monetary policy.
ECB President Mario Draghi was nevertheless cautious on Thursday about the strength of economic recovery in the euro zone. Many analysts saw his remarks as an attempt to talk down the rise of the euro.
If so, he succeeded: The euro was being quoted at $ 1.33 at the end of the week having risen a few days earlier to the highest level for 14 months and above $ 1.37.
The subject is expected to be on the agenda at the end of the week in Moscow, where finance ministers and central bankers from the leading rich and emerging economies, the Group of Twenty (G20), meet with a Russian as president for the first time.
With the economic recovery is struggling to gain momentum globally, Russia has set as the main target in the run-up to a G20 summit in Saint Petersburg on Sept. 5 and 6, the search for new sources of growth.
Rich countries, forced to contain or reduce debt, are injecting huge amounts of money into their economies to support activity.
Leading central banks have used various levers to this end, notably the United States. The Japanese government has just convinced its central bank to go down this road in an attempt to arrest a deflationary spiral that has sapped its economy.
But this use of the monetary lever has had the effect of pushing down the yen. That may be a relief for Japanese industrialists, but it is a problem for countries such as Germany, one of the biggest exporting countries in the world.
For some analysts, the main is problem is a lack of coordinated decision-making, running against the spirit of the G20, which is intended to coordinate economic policies around the world.
The Japanese policy is also likely to worry South Korea: its currency, the won, has risen commensurately against the yen.
Tokyo's move will also be of concern to countries in South America which have frequently criticized US monetary policy for the same reason. It was Brazil that launched the latest use of the term "currency war" in 2010.
This so-called war now goes beyond the concerns of emerging economies, analysts at ING Investment Management said, commenting that in recent weeks it seems to have reached the developed world.
The ECB is reluctant to create money to support the euro zone economy, and there are concerns that the euro zone could end up being isolated and pay a price in terms of growth.
Draghi warned that if policies elsewhere in the world did not reflect the consensus view of the G20, this fact would have to be discussed. His remarks came after France had called for "serene" debate.
German Finance Minister Wolfgang Schaeuble also expressed "deep concern" about the change of direction in Japan.
And the president of the German central bank, Jens Weidmann, has said he is worried that there could now be a "race to devaluation".
World Cup football fakes keep Dubai’s ‘Dolce & Karama’ traders busy
- Dubai's “Dolce and Karama” is the emirate's copycat capital
- Neymar Jr shirts are proving especially popular with local shoppers
DUBAI: Tucked away in an old residential district and far from Dubai’s glitzy air-conditioned malls, the Karama area of the city is doing a roaring trade in selling World Cup football shirts.
But if you’re looking for the genuine article, you may have come to the wrong place.
Karama is Dubai's copycat capital where the knockoff imitations of the world's most famous fashion brands are sold for a fraction of the genuine price.
Known to some locals jokingly by the epithet “Dolce and Karama,” a play on the Dolce & Gabbana Italian fashion house, this is a place where if you have to ask the price, you probably can afford it.
With three weeks to go until football’s new world champions are crowned, the world’s biggest sporting tournament is keeping the tills chiming on the street that has become notorious for selling everything from fake Luis Vuitton bags to knockoff Ray-Ban sunglasses.
However since the tournament kicked off just over a week ago, it’s been football not fashion, that has put a smile on the face of traders.
Retailing for a fraction of their high-street cost, the copycat shirts — especially those bearing the name of Brazilian superstar Neymar — are flying off the stalls less than week into the tournament, as UAE-based fans who want to don the colors of their favorite team or player, look for bargains.
Mohammad Ashraf has been trading in Dubai’s Karama Shopping Complex for 15 years.
At his store, Mina Fashion, Ashraf said the World Cup has brought a booming trade.
When asked how many shirts he would sell prior to the Fifa World Cup, he shrugged.
“Maybe one, two — maximum five a day,” he said.
But the Indian trader has quadrupled his business since last week’s kick-off.
“Now, we have been very busy,” he said. “We sell at least 20 pieces a day — maybe more,” he said.
His football shirts are a fraction of the cost of the genuine article on sale in Dubai malls where retailers are feeling the pressure from the growth of online rivals, the introduction of VAT and the strong dollar to which the UAE dirham is pegged — that is hitting tourist spending hard.
Karama football shirts sell for about 65 dirhams ($18) in adult size and 55 dirhams for children. But the real deal costs three or four times as much a few miles down the road in the Dubai Mall, the city’s biggest tourist draw.
In Karama, the football shirts of the Brazil, Argentina and Germany teams have been among the biggest sellers.
And the most popular player?
Ashraf said shirts bearing the name of Brazilian footballer Neymar da Sila Santos Junior have been flying off the shelves.
Abdulla Javid, runs Nujoom Al Maleb in the Karama shopping district — a shop selling a variety of knock-off sportswear — including World Cup shirts for men, youths and children.
“They are not real, not branded — branded ones are very expensive,” he said.
“We have shirts for Germany, for Argentina, for Portugal, for Sweden, for Brazil and for Belgium,” he said, pointing to racks of multi-colored football shirts.
Mens shirts retail for about 45 dirhams for adult sizes in his shop and 40 dirhams for youths. For young children, he sells shirts and shorts for a combined price of 30 dirhams.
The World Cup has also been a welcome boom for business.
“Before we sell maybe between five to 10 (shirts) a day,” he said. “Now, at least 20 to 30 pieces a day. It has been very busy. This time is a good time for us.”
Also at Karama Shopping Complex is Zico Sports.
Ahmed Jaber, a 53-year-old trader, said there are good deals to be found in at the shop he has worked in since the 1980s.
He sells football shirts that are both “branded” and “non-branded” — in other words the genuine article and cheaper knock-offs.
He said customers have been happy to shell out for the genuine football shirts for the adult sizes — which he sells for 379 dirhams, but for children, shoppers prefer to buy the fake football shirts, which he sells for about 30 dirhams.
The most popular shirts since the start of World Cup have been for Brazil, Argentina and France, he said, but his shops have an abundance of kit for all competing countries.
When he asked how the 2018 World Cup had been for business, he laughed.
“Not bad at all!,” he said.