Forex Flash: BoE Governor King concerned over currency wars – BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that Bank of England Governor King has expressed concerns over escalating currency wars at a speech made to the Economic Club of New York.
He is reported to have said, "my concern is that in 2013, we'll see the growth of actively managed exchange rates as an alternative to the use of domestic monetary policy." King proceeded to note that "you can see, month by month, the number of countries who feel that active exchange rate management, always to push their exchange rate down is growing."
Hardman concurs, highlighting more recent examples of Brazil who have adopted a form of dirty float for the Real, Turkey who have signalled strongly to the market that they will intervene to weaken the Lira if it appreciates on a trade weighted basis beyond a specific level and the Czech republic which is on the verge of intervening directly to weaken the Koruna having exhausted conventional monetary easing measures.
The pound has benefited from its quasi-safe haven role during the Euro-zone debt crisis, which has drawn concern from the MPC as undervaluation has been eroded, dampening the potential support from external demand ahead when it recovers required to rebalance the UK economy. Hardman finishes by noting that Governor King's attempts to talk down the pound and further QE from the BoE over the past year have had limited weakening impact.
He is reported to have said, "my concern is that in 2013, we'll see the growth of actively managed exchange rates as an alternative to the use of domestic monetary policy." King proceeded to note that "you can see, month by month, the number of countries who feel that active exchange rate management, always to push their exchange rate down is growing."
Hardman concurs, highlighting more recent examples of Brazil who have adopted a form of dirty float for the Real, Turkey who have signalled strongly to the market that they will intervene to weaken the Lira if it appreciates on a trade weighted basis beyond a specific level and the Czech republic which is on the verge of intervening directly to weaken the Koruna having exhausted conventional monetary easing measures.
The pound has benefited from its quasi-safe haven role during the Euro-zone debt crisis, which has drawn concern from the MPC as undervaluation has been eroded, dampening the potential support from external demand ahead when it recovers required to rebalance the UK economy. Hardman finishes by noting that Governor King's attempts to talk down the pound and further QE from the BoE over the past year have had limited weakening impact.
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