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Title: Euro most resilient to climate change, yuan most exposed – Barclays

Jun 14, 2022 09:21AM ET

By: AnalysisWatch

According to Barclays, climate change could benefit the euro, while the Chinese yuan and Japanese yen will suffer the most unless more efforts are made to limit the effects of global warming.

The British bank outlined the impact of climate change on exchange rates, saying that rising temperatures and their associated economic costs could pose "a growing and costly risk with a tangible impact on exchange rates".

Under the bank's most stringent scenario, the euro is the most favourable exchange rate, appreciating 0.5% against the dollar by 2030 and 3.9% on average over the next five decades, with the eurozone's trade openness helping to cushion the economic impact of global warming.

In contrast, the Chinese yuan could depreciate by 5.5% by 2030 and further depreciate by 7% over the next decade, deteriorating to more than 10% per decade over time.

Barclays said it used forecasts of national productivity and capital flows for the next five decades to model how climate change could affect each country's growth, and therefore its currency, under current conditions.

Rising sea levels, fluctuations in crop yields, changes in disease incidence, tourism or even the effects of heat on labour productivity are some of the factors included in the analysis, Barclays analysts said in a report.

Global losses from extreme weather events reached $1.38 trillion in the past decade, have increased nearly eightfold since the 1970s and are expected to exceed $2 trillion this decade, the report said.

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