The key to all of the above analysis is to move away from the traditional approach of thinking about "currency pairs" such as USD/EUR and USD/CNY and to see USD, EUR and CNY in a triangular relationship. If CNY and EUR are both strong then the U.S. is the winner in the currency wars and has some prospect of growth. But if CNY devalues on a Chinese growth collapse and EUR devalues on fears of financial distress, then the result will be strong U.S. dollars making the U.S. the temporary loser in the currency wars. At that point, the U.S. will bring out its secret weapon, Quantitative Easing, dressed up as nominal GDP targeting, to fight back and cheapen the U.S. dollar to preserve growth in the U.S. This is the ultimate futility of currency wars - it just propagates round after round of competitive devaluations.
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Jim Rickards has an interesting piece written on KWN Blog.
Full link: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/1/17_Rickards_-_Currency_Wars,_Gold_%26_Inflation_Worse_than_1970s.html
Welcome to the decade of currency wars.