The Bank of Japan's decision in October to expand its easing program could lead to another round of currency wars, says Nouriel Roubini, an economist at New York University.
The dollar hit a seven-year high against the yen and a two-year high against the euro Wednesday, as the U.S. economy chugs along and Japan and the eurozone stumble.
"Domestic demand is weak in advanced economies, and the only way to grow the economy is to weaken the currency to boost net exports," Roubini told Yahoo Finance.
Already the Bank of Japan's move has sparked reaction throughout Asia, he noted. "From Korea to Malaysia to Thailand, . . . even the central bank of China has recently cut rates to avoid the strengthening of its currency."
Currency devaluation will spread to Europe next, Roubini predicted. Many experts expected the European Central Bank to announce additional stimulus moves at its meeting Thursday.
"The first to be hurt by a weak yen [will be] the eurozone, so the ECB will have to do quantitative easing," Roubini said. "The Swiss National Bank, the Norwegians and the Central Europeans" will then follow suit.
Meanwhile, he expects gold to struggle. “For now, the Fed is not easing, and the dollar is strengthening,” he says. “Real rates are going to go higher so all of the main factors regarding gold indicate that gold will go down.”
He predicts the precious metal will fall to $1,000 per ounce by the end of 2015 from $1,210 now.
But Ramesh Ponnuru, senior editor at the National Review, says we shouldn't be worried about currency wars.
"In the depressed conditions of recent years, expansionary monetary policies that cause currencies to devalue seem to have helped both the countries that undertook them and other countries," he writes on Bloomberg.
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