by Joice Alves
LONDON, June 14 (Reuters) – The euro could be the currency most resilient to the effects of climate change while the Chinese yuan and Japanese yen are likely to suffer the most if no effort is made to mitigate the impact from rising temperatures, Barclays analysts said.
After mapping the effects of climate change on exchange rates, the British bank says global warming and the economic costs associated with it could pose “a growing and costly risk, with a tangible impact on exchange rates”.
In its most pessimistic scenario, the euro is the best-performing currency, appreciating 0.5% against the dollar by 2030 and 3.9% on average over the next five decades, opening trade in the euro zone helping to mitigate the economic impact of global warming.
On the other hand, the yuan could lose 5.5% by 2030 and more than 7% over the following decade.
Barclays used forecasts of national productivity and capital flows for the next five decades to model how, given current conditions, the economic growth of the countries studied and their currencies could be affected by climate change.
Rising sea levels, variations in agricultural yields, changes in the occurrence of diseases or the impact of heat on labor productivity are some of the factors included in the analysis.
Total losses due to extreme weather conditions amounted to 1.380 billion dollars during the previous decade. They have multiplied by almost eight since the 1970s and should exceed 2,000 billion dollars this decade, estimates Barclays.
“Countries experiencing declines in productivity … are also likely to experience less capital inflows,” which will hurt exchange rates, the bank said.
The yuan could lose 53% of its real value over the next 50 years due to China’s rapid industrialization over the past two decades and “soft environmental policies”, according to the analysis.
“The risk of prioritizing growth over the environment and the lack of a local environmental network remain significant challenges,” Barclays said.
For Japan, rising sea levels pose the biggest challenge, according to Barclays, which predicts that environmental factors will reduce the value of the yen by almost 3% by 2030. The Japanese currency could lose 55% of its value in 50 years and become the worst performing currency in the world by mid-century, according to the bank.
The US dollar is seen as ‘outperforming’, benefiting from “the diverse nature of the US economy”, Barclays added.
(Report Joice Alves, French version Laetitia Volga, edited by Kate Entringer)