Trade tensions are starting to pull foreign-exchange markets into the arena

While a falling currency could boost exports, central banks are signaling their goal now is to stem investor flight

Trade tensions between the US and China are starting to pull foreign-exchange markets into the arena. Yet far from embracing their currencies as a weapon, many countries are being forced to take a defensive posture against the almighty dollar.

Central banks seem more intent on keeping their currencies steady and stopping money from escaping rather than engaging in devaluations to boost their competitiveness in trade. Officials in China, South Korea and Indonesia on Wednesday were among those taking steps to buoy their currencies as the prospect of more rapid depreciation raised the specter of capital outflows.

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