“HSBC Bullish on Dollar as Currency War ‘Intensifies”

By: Labiba - May 24th 2013

HSBC News Published: Friday, 24 May 2013 | 5:52 AM ET
By: Deputy News Editor, CNBC.com
HSBC has turned bullish on the U.S. dollar, as a result of a global currency war which it said is “intensifying”.

The bank said the likely “winner” of central banks’ attempts to use monetary policy to manipulate the value of currencies would be the dollar, and had adjusted its forecasts accordingly.

James Bullard, president and CEO of St. Louis Federal Reserve Bank, tells CNBC that if you allow a flexible exchange rate you can have your own independent monetary policy regardless of the US.

“We believe the currency war will be a key element of the relative performance of currencies going forward. It is a development that points to a stronger dollar than we previously had penciled into our forecasts,” said HSBC’s Global Head of Foreign Exchange Strategy, David Bloom, in a note.

Central banks have been overseeing measures which help devalue currencies – such as expansive asset purchasing programs and low interest rates – for some time. But talk of a currency war has intensified over the last six months as a result of Japan’s dramatic policy moves, which have weakened the yen by more than 25 percent against the dollar since November.

Other central banks have since followed suit – a result, HSBC said, of the Bank of Japan’s success.