Expressing concerns over China's currency devaluation, Reserve Bank governor Raghuram Rajan on Thursday said the Yuan devaluation raises the risk of currency war if the move was part of a long-term competitive devaluation, news agency Reuter reported.
Speaking at a banking event in Mumbai, Rajan said that the dangers of "tit-for-tat" actions by other countries, also engage in similar moves to boost export competitiveness, would ignite a "currency war, a scenario that can be quite damaging for the global economy.
Weighed down by Yuan devaluation, Indian rupee has fallen more than 2 per cent against the dollar, falling to its weakest since September 2013, when India was in the midst of its worst currency turmoil in more than two decades, says Reuter report.
The outlook on emerging Asian currencies in the past two weeks also deteriorated to its worst in years, as bearish bets on the Chinese yuan hit their largest in more than five years after the surprise devaluation, a Reuters poll showed on Thursday.
Although Rajan added he did not believe the actions from the People's Bank of China were an indication of a long-term devaluation, he warned of the dangers, as per Reuter report.