Declining Euro Stokes Currency War Fears

This week, the European Central Bank began its massive quantitative easing program in an effort to boost the region's stagnant economic growth and increase domestic demand.

However, the program has also caused the common currency to decline sharply, leaving the region's trade partners in Asia worrying about the state of their own economy.

Fed And ECB Diverge

This week, the euro fell to a 12 year low against the U.S. dollar, with the two currencies becoming nearly equal at €1 to $1.0513.

The decline was further exacerbated by worries that the U.S. Federal Reserve will begin moving in the opposite direction sooner than expected with a rate increase some time this year.

Japanese Yen Sinks

Similarly, the Japanese yen has been on a downward trajectory this year as Prime Minister Shinzo Abe tries to get the nation's economy back on track.

While a weak yen has helped the country's exports remain competitive in the global market, it has also created some tension with other nations over whether or not Abe is manipulating exchange rates.

Related Link: Strong Dollar Wreaks Havoc On Share Markets

More Cuts

The Bank of Korea cut its interest rates on Thursday and Thailand announced its own rate cut on Wednesday in what most believe were attempts to lower their own currencies to keep up with their peers. Both nations say that a weak yen coupled with a falling euro has made it difficult for their own exports to compete.

Currency Wars Bad For Trade

The prospect that central banks around the world are racing to devalue their currencies has created a sense of mistrust among trading partners and stirred up controversy about trade agreements.

The Trans-Pacific Partnership, a free-trade agreement being negotiated between the U.S. and several Asian nations including Japan, has been hotly contended by some lawmakers in Washington who claim currency manipulation would make the deal disadvantageous for the U.S.