Currency wars when everyone is a rate cutter

It seemed like we were going to see more monetary policy diversification in 2015 with the Fed starting to raise rates, but now the more likely scenario is monetary policy correlation. This is not coordination in the normal sense of central banks working together, but rather actions by central banks to ensure that other countries do to have an exchange rate advantage. Calling it currency wars assumes a sense of aggressive reaction and discussion. This currency war is for most central banks undeclared. No one is having a press conference to declare an enemy or specific actions against another country. We just have to infer actions and reactions as policies change.

The ECB has announced its QE plans and the euro continues its slide versus other currencies. For those on the periphery of the euro-zone, action has to be taken. For the SNB, the currency cap was eliminated. For Denmark, there was the announcement of no new government bonds. Eastern Europe, Sweden, and Norway are all effected by this latest action and have to respond. The BOE will also have to think about a next move.

Japan has been pushing QE with an explosive BOJ balance sheet, but now German rates are below  Japan. The Japanese currency has declined but the intended effects have not kicked in to the level expected. Nevertheless, the impact on other Asia economies is growing.

Emerging markets are generally biased to offset Fed policies. This is not going to change in 2015. China has been targeting monetary programs to increase credit availability. The PBOC cannot have the yuan move in lock-step with the dollar. It is now at the upper end of its widened band. 

The US is the outlier with the end of the QE program and discussion of rate increases mid-year. This may be less likely as further easing around the rest of the globe continues.