Dumping
Updated on July 18, 2023
“Dumping” refers to the act of a country or market participant selling a large quantity of its currency in a relatively short period, often with the intention of driving down the currency’s value. Dumping can be a deliberate strategy used by governments, central banks, or institutional investors to gain a competitive advantage in international trade or financial markets. Dumping in currency markets can be achieved through various means, such as large-scale currency sales in the foreign exchange market, intervention by central banks, or coordinated actions by market participants. It is important to note that dumping can have significant implications for global currency markets and may trigger volatility or disrupt the stability of exchange rates.
What is the purpose of dumping in currency markets?
The purpose of dumping in currency markets is typically to make the country’s exports more attractive and competitive by reducing the value of its currency relative to other currencies. When a currency is dumped, its exchange rate typically declines, which makes the country’s goods and services cheaper for foreign buyers. This can boost the country’s export competitiveness and potentially increase its trade surplus. Dumping can be a contentious issue in international trade, as it can be perceived as an unfair trade practice that distorts market conditions. It may lead to trade tensions or prompt other countries to respond with retaliatory measures, such as imposing trade barriers or initiating their own currency interventions.
