Policy action like the bill against undervalued currencies that passed through the US House of Representatives will make the currency war even worse, Richard Cookson, CIO of Citigroup Private Banking told CNBC Monday.
At the end of September, the House passed a bill that treats China's exchange rate policy as a subsidy. China has pegged its yuan to the dollar, controlling its appreciation tightly so that it does not hurt its exports.
Investors anticipate that the Federal Reserve will launch into a second round of asset-buying, or quantitative easing, to boost the economy, which will lead to a further weakening of the dollar.
"We just had a blatantly protectionist bill going through the House of Representatives in the States and now you're now getting respected economists saying there's no difference between imposing tariffs and having a currency depreciation," Cookson said. “QE (quantitative easing) is a currency weapon.”
"It looks to me as if we're already in a currency war,” he said. "This looks as though it's going to get worse rather than better."
Other analysts disagree. Talk of a currency war is just countries reacting to normal pressures, Manoj Pradham, economist at Morgan Stanley, told CNBC.
"Policymakers have been fighting this battle for over a century now,” Pradham said. “It’s just difficult for them to do this again because they're starting to see the beginnings of a recovery."
Pradham agreed that “there is a way to consider it a currency argument," but pointed to the US’s interest in quantitative easing. “They're thinking about recovering a domestic economy,” he said, not supporting a currency war.
The most important aspect of any kind of such severe tensions would be retaliation, “and we just haven’t seen that," Pradham said.