May 28, 2022 — The US dollar is up 12 % against the euro over the last year. Having moved from 1.21 $/€ in May 2021 to 1.07 $/€ today, the exchange rate seems to be approaching one-to-one parity for the first time. Europeans are not happy about it. If you think that prices for oil and other commodities are high now in terms of dollars, you should see what they look like in terms of euros. Get ready for “reverse currency wars.”
The regular sort of currency wars featured countries feeling aggrieved that their trading partners were deliberately pursuing policies to weaken their own currencies. The feared motive would be gaining unfair advantage in international trade. The original phrase “currency wars” was a colorful description of what international economists had (more informatively) long called “competitive devaluations” or, when exchange rates float, “competitive depreciation.”