The ECB Must Act Soon to Avoid a Currency Crisis

The remorseless strength of the U.S. dollar as the global haven is starting to cause problems — and not just in emerging markets. Japan and Europe have traditionally preferred to have their currencies run a little weak to the dollar to boost exports. But the slide this time is worrisome. The yen has fallen to its weakest levels in two decades, testing the Bank of Japan’s resolve in maintaining a lid on bond yields. The eurozone, however, is where the most discomfort is felt because it is exacerbating inflation, in part because imports become more expensive. The common currency anchors the European Project so a precipitous drop risks becoming existential for continental unity in a way that yen weakness doesn’t….

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