More countries may artificially depreciate their currencies in 2012, provoking "currency wars,â according to 64 percent of foreign exchange executives surveyed at a Bloomberg FX conference.
The poll results, released today, were taken at the recent Bloomberg's FX11 Summit, which gathered more than 270 bankers, portfolio managers, traders and treasurers from leading firms to discuss trends in the foreign exchange markets and the economic outlook for the coming year.
âThe Bloomberg FX11 Summit tackled the critical issues that will shape the currency markets in the next six to 12 months," said Tod Van Name, Global Head of Foreign Exchange and Economics at Bloomberg. "Surveying our audience allowed us to understand how the currency markets may respond to current monetary policy decisions and giant swings in the currency market that these decisions may create."
Results of the FX11 survey show:
â¢ Currency wars will continue next year - Sixty-four percent of participants say global currency wars will continue because more countries may artificially depreciate their currencies in 2012.
â¢ EU nations may drop Euro as their currency - Forty-two percent of participants say they expect the number of countries using the Euro as their currency to decline over the next 5 years. Today, 17 countries in the EU use the Euro as their currency.
â¢ Chinese Yuan will gain on US dollar - Almost 75 percent of the participants expect Chinese Yuan to appreciate by as much as 10 percent against the US dollar by 2012.
â¢ More will rely on technical analysis - Thirty-eight percent of respondents say technical analysis will be the most reliable approach to foreign exchange trading in the next year. Only 15 percent of respondents say a carry trade strategy can be relied on under current economic conditions.
â¢ Emerging markets currency will take on the USD - Fifty-eight percent of respondents predicted that emerging market currencies will outperform the US dollar in 2012.
"We were surprised to see that FX executives are favoring technical analysis now," Van Name said, "as carry trade has netted the best results over the last 10 to 15 years. While market volatility and carry trades are incompatible in the short-run, it will be interesting to see how well technical analysis will perform amid sharp moves introduced by government intervention."
Bloomberg FX is available on the Bloomberg Professional service, which provides price discovery, valuation, pre-and-post trade services and execution for more than 180 different currencies.