A new front in the "currency war"

An improvement in risk appetite since the turn of the year has supported further gains in Latin American financial markets. But with the good news has come renewed upward pressure on the region’s exchange rates. Talk of “currency wars” has resurfaced and now appears to have spread from Brazil to the Andean nations of Chile, Colombia and Peru. In this Watch we take a closer look at how policymakers are likely to respond – and explain why most currencies are unlikely to strengthen significantly from here.