This statement comes from an article in this week's Economist. Earlier in the piece, they talk about the Great Depression and make the following point that helps explain why devaluations cause trade tensions:
Countries that cut the link to gold quickly and allowed their currencies to fluctuate endured shallower recessions and recovered more quickly than those that stuck with it. Freed from the need to uphold a gold-price parity, these countries could lower interest rates and so stimulate spending. By devaluing against gold, their money also became cheaper against currencies that kept their gold parity, giving domestic producers a cost advantage over many foreign firms. (emphasis added)
I'm going to use this as an opportunity to make a point that I've made before: Given the important effect currency values can have on trade, in particular the advantages they can give domestic companies over their foreign competitors, perhaps we need some trade rules in this area.
