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LONDON — The global currency war entered a new and critical phase on Tuesday as China’s surprise devaluation threatened to unleash a wave of competitive devaluations and keep monetary policy around the world looser for longer – perhaps even forcing the U.S. Federal Reserve to delay or slow its expected rate rise cycle.

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China’s shock move is scorching through every asset class — commodities, currencies and exporters are all tumbling on fears the world’s second-biggest economy is headed for a deep slowdown.





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‘Currency wars’, a phrase used by Brazil’s former finance minister Guido Mantega in 2010 to describe how competing countries explicitly or implicitly weaken their exchange rates to boost exports and gain trade advantage, have intensified in recent years.

As interest rates have fallen to zero and below in many developed economies, money printing has proliferated and exchange rates have become one of the few remaining levers to stimulate business activity and, in some cases, avoid deflation.