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Swissie and Yen Top List of Currency War Aggressors: HSBC

Kyoungil Jeon | E+ | Getty Images

As the internet generation would say, the phrase "currency war" is trending. Is it overblown?

Not according to British bank HSBC. "The currency war is intensifying: the number of participants is rising, fresh policy tools are being used to fight, and the scale of influence on the wider foreign exchange market is increasing," wrote HSBC strategists, led by David Bloom, in a research note on Tuesday which ranks global currencies' appetites for war.

HSBC found the Japanese yen and the Swiss franc topped the chart as the world's most aggressive currency warmongers, scoring a maximum score of 10/10.

"The Swiss floor was introduced with the express purpose of preventing additional Swiss franc strength. It is the classic example of a currency war weapon. The Swiss franc scores a 10," wrote Bloom.

"So too the Japanese yen, given the active efforts to weaken it through rhetoric, a higher inflation target, promises of future monetary easing, and a government adamant that it can bring inflation back."

Bloom said that countries are using new "weapons of mass depreciation" to weaken currencies, along with the "traditional" choices of rhetoric, interest rates and direct intervention.

"In emerging markets, regulations have become a favored additional tactic, for example changes to tax laws or new macro prudential measures where currency weakness is a likely result. Brazil is one notable example of this, where new taxes were levied on financial transactions that were pressuring the Brazilian real," he said. The Brazilian real scores 7/10 for aggression.

"Others have increased reserve requirements on foreign purchases of local assets, or sought to increase incentives for domestic investors to channel money abroad."

While the majority of global currencies have become more war-like over the last year, some countries are choosing to decrease intervention in their currency market, said Bloom.

For instance, HSBC gave the Chinese yuan 4/10 for aggressiveness in 2013, down from 6/10 a year ago, as the People's Bank of China becomes increasingly "hands off" and moves the yuan towards convertibility.

Contact World Economy

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