Japan-headquartered broker-dealer, Garrett Knight Associates says it is highly skeptical of a pledge by G20 leaders over the weekend in which they promised to avoid competitive devaluation of their currencies for the purpose of gaining advantage over each other in the world’s export markets.

The prospect of a protracted currency war has become more likely since China devalued the yuan (renminbi) against the US dollar last month after releasing data showing its exports slumped by 8.3% compared with a year earlier.

The move, touted by the Chinese authorities as simply allowing the yuan to float more freely, drew reciprocal moves by South Korea and Vietnam both of whom compete with China in several export markets.

Garrett Knight Associates’s senior economist, Yuri Abe said, “This show of solidarity is admirable but it has no basis in fact. What they say in public is typically a world away from what is said when they come under pressure at home from voters and within their own governments. The ECB, the BoJ and the PBoC are actively devaluing their currencies in order to boost their economies so it doesn’t matter what reasons they give for doing what they do, the net effect remains the same.”

The global economy is facing strong headwinds including uncertainty over a tightening of US monetary policy, worries over the scale of the slowdown in China and an EU that, despite a massive quantitative easing program, still shows few signs of making a meaningful recovery.

Garrett Knight Associates warns that, despite the public displays of unity, each country within the G20, with the exception of those whose monetary policy is administered by the ECB, will ultimately give first priority to matters at home.

“Investors should prepare for a continuation of the currency war and position themselves accordingly,” warned Abe.

About Garrett Knight Associates

Garrett Knight Associates is a highly specialised international investment management firm. With over a decade's worth of experience in providing our clients with discretionary and advisory portfolio services for private investors, trusts, pension schemes and high net worth investors, we use an expansive array of carefully selected investment products to maintain healthy growth targets.

The main pillar of our investment ethos and the issue that separates us from other companies offering investment management services is our commitment to employee excellence, providing you with the highest level of personalised services. All of our staff listen very carefully to our clients' investment aims, with particular attention being paid to their preferences and interests.