Editing Exchange rate (section)

==Manipulation of exchange rates==
A country may gain an advantage in [[international trade]] if it [[Market manipulation|controls the market]] for its currency to keep its value low, typically by the national [[central bank]] engaging in [[open market operation]]s in the foreign exchange market, or through preventing the exchange of foreign currency for domestic notes. The [[Renminbi#Value|People's Republic of China]] has been periodically accused of exchange rate manipulation,<ref>[http://news.bbc.co.uk/1/hi/8566597.stm "China denies currency undervalued"] article on BBC News on Sunday, 14 March 2010</ref> notably by [[Donald Trump]] during his successful campaign for the US presidency.{{fact|date=May 2025}}

Other nations, including [[Icelandic króna|Iceland]], [[Japanese yen#Post-bubble years|Japan]], [[Brazilian real#History|Brazil]], and so on have had a policy of maintaining a low value of their currencies in the hope of reducing the cost of exports and thus bolstering their economies. A lower exchange rate lowers the price of a country's goods for consumers in other countries, but raises the price of imported goods and services for consumers in the low value currency country.<ref>[https://www.nytimes.com/2010/10/04/world/04currency.html "More Countries Adopt China’s Tactics on Currency"] article by David E. Sanger and Michael Wines in ''[[The New York Times]]'' October 3, 2010, accessed October 4, 2010</ref>

This practice is known as "modern mercantilism", namely lowering the exchange rate below its real and fair price, to increase the competitiveness of trade and exports, and encourage economic growth.<ref>{{Cite book |last=Rahman |first=Abdurrahman Arum |url=https://books.google.com/books?id=MGxUEAAAQBAJ |title=Initiating a True International Currency |date=2021-12-13 |publisher=Global Currency Initiative |edition=3rd |location=Jakarta |pages=42–49}}</ref> Rodrik said that this practice was quite effective in encouraging economic growth in developing countries but at the expense of other deficit countries.<ref>{{Cite journal |last=Rodrik |first=Dani |date=September 2008 |title=The Real Exchange Rate and Economic Growth |url=https://muse.jhu.edu/article/261232 |journal=Brookings Papers on Economic Activity |language=en |volume=2008 |issue=2 |pages=365–412 |doi=10.1353/eca.0.0020 |issn=1533-4465}}</ref>

In general, exporters of goods and services will prefer a lower value for their currencies, while importers will prefer a higher value.