They would run down their trade surpluses and, in some cases, allow their currencies to appreciate.

Indeed, the part that currencies play in world trade through their role in invoicing receives too little attention.

But what about currencies?

Instead, two new major currencies emerged, as the strength of the Japanese and (West) German economies produced big trade surpluses.

So, on an overall trade weighted basis, the renminbi is substantially higher relative to the currencies with which it competes.

Wanted Chinese Leadership on Currencies

So the euro should play a larger role in international trade in the future than the sum of the currencies it replaced.

Floating rates worked for the Big Three currencies, forestalling traumatic crises for other currencies too.

Ideally, Asian currencies would rise much more than 15 while European currencies would rise less.

Floating Currencies are the Only Way

European currencies weakened against the dollar.

And, with the euro down significantly relative to many other currencies over the past year, Europe s trade balance can increase further in the months ahead.

After China eclipsed the US as Brazil s largest trading partner, China and Brazil announced plans to settle trade in their national currencies rather than dollars.

Collapsing emerging market currencies, and the resulting trade pressures, will make it all the more difficult for them to prevent their unemployment levels from rising significantly.

Regional currencies, flexible against the dollar and Euro, might be a better defense against financial panic than individual national currencies

CAMBRIDGE Where are global currencies headed in 2011?

Emerging countries in Latin America, East Asia, Eastern Europe, and Africa are innocent bystanders in the tussle between the US and China over currencies and trade imbalances.

So products were developed that allowed investors to borrow easily in several currencies at once and invest in a portfolio of high interest rate currencies. This protected investors from a general sell off of the carry trade and lessened their exposure to idiosyncratic risks.

Efficiency dictates the use of fewer and larger currencies (and foreign investors, understandably wary of weak and volatile currencies, demand it).

Most importantly, the carry trade generates global financial fragility by creating fundamental and dangerous mismatches. First, carry traders borrow in yen but invest in dollars and other currencies.

With Iran, the Kremlin has launched a joint bank that will enable Russian companies to expand bilateral trade without using Western currencies or worrying about Western financial sanctions.

This is particularly true with respect to lending in foreign currencies to economic agents that do not have revenues in those currencies.

After China eclipsed the US as Brazil s largest trading partner, China and Brazil announced plans to settle trade in their national currencies rather than dollars. Although Russia accounts for only 5 of China s trade, the two countries announced a similar agreement.

Commodity currencies had to come off their meteoric highs.

Since then, most emerging market currencies have rebounded sharply.

All currencies fell against the dollar and the yen.

Other Asian countries should let their currencies weaken, too.

In simplified Chinese, the heart is missing. Different currencies.

Emerging market currencies were hammered, as were commodity currencies such as the Canadian, Australian, and New Zealand dollars, and the South African rand.

Asian governments will probably gradually lose their battle in this war in 2011, allowing their currencies to appreciate in the face of inflationary pressures and threats of trade retaliation.

This led to increased flows into the carry trade, which for a while increased its success, because higher inflows tended to exacerbate the weakness of the low interest rate currencies.

Currencies fell, interest rates rose, and credit default swaps soared.

In the ongoing showdown over currencies, who will blink first?

The issue is not free trade versus protectionism, but smart trade versus polarizing trade.

Free trade agreements do not ensure free trade.

Of course, a strengthening of the oil currencies (including not only the Gulf States, but also other Middle East countries and Russia) would not turn around the US trade balance overnight.

A single currency also means a common exchange rate relative to other currencies, which, for any country within the euro zone, precludes a natural market response to a chronic trade deficit.

A single currency also means a common exchange rate relative to other currencies, which, for any country within the euro zone, precludes a natural market response to a chronic trade deficit.

Consider trade.

International trade

And floating and fixed exchange rate regimes coexist uneasily, because volatility tends to affect the floating currencies (often the euro, and recently the Latin American currencies).

East Asia s victims of currency crises were, like most other nations, on fixed rates pegged to the dollar, other major hard currencies, or baskets of currencies.

Countries running surpluses must adopt expansionary policies and appreciate their currencies.

In fact, this will happen whatever the exchange rate between currencies.

Traditionally, the weak and useless currencies were thrown into the abyss