Woodford IM: Fed hike will lead to a new episode of 'currency wars'

Conditions may worsen

Woodford Investment Management has said the Federal Reserve's decision to raise interest rates by 0.25% could lead to a 'new episode' of currency wars as emerging markets are forced to depreciate their own currencies further.

In a blog post, the company said the Federal Reserve's decision to raise US interest rates to 0.25%-0.5% for the first time since 2006 was justified for the US economy, but is likely to intensify currency pressures in emerging economies, which have been suffering since the US ended its quantitative easing programme last year. "The currencies of many of these emerging economies have been under significant pressure in this period and that looks set to continue," it said. "Indeed, conditions may worsen, particularly if these economies feel that their only response to the growing pressure...