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Refugees of the Currency War, Unite!

BUENOS AIRES – Today’s global currency war resembles real war in two important respects: a face-off over the structural imbalances between two large opponents – China and the United States – has forced uncomfortable smaller allies to take one side or the other, and third parties that may not be directly engaged are suffering collateral damage from both sides of the dispute.

Latin America’s rapidly growing economies are particularly vulnerable, as they are forced to confront both China’s exchange-rate inflexibility and the impact of dollar devaluation arising from the US Federal Reserve’s expansionary monetary policy.