Hence, the process of competitive devaluation is one marked by rapid volatility of exchange rates as countries sequentially depreciate their currencies. Nevertheless, there remains an important asymmetry in the management of exchange rates between advanced and emerging economies. In emerging economies, central banks often intervene in foreign exchange markets. The result of possible manipulation of exchange rates is two-fold. Second, the desire of US companies to move to emerging economies, taking advantage of cheap factor inputs and favourable business conditions, gets strengthened given the devalued exchange rate.

Source: Mint May 31, 2018 03:33 UTC