Are Expanding Deals in Currency Swaps Signs of Currency Wars?

Lately I questioned the popular wisdom promoted by politicians and by media as “currency wars”

Reports say that the Bank of England (BoE) may seal a deal with the People’s Bank of China (PBoC) for currency swap lines.

From Reuters

Britain said on Friday it hopes to set up a currency swap line with China soon to help finance trade, a move that will enhance London's drive to become a leading offshore centre for yuan trade.

China, in an effort to internationalize the yuan and eventually make it a world reserve currency, has already agreed swap lines with more than 15 other countries, mostly emerging markets.

The Bank of England said on Friday it would work with China's central bank to sign a final agreement shortly on a reciprocal three-year yuan-sterling swap, building on its statement last month that it was ready "in principle" to adopt the swap line.

Last December global central banks went on to renew arrangements for forex swap lines

From Reuters

The U.S. Federal Reserve said it had extended for another year the dollar swaps with the European Central Bank, Bank of Canada, Bank of England and Swiss National Bank. The announcement was released at the same time by the other central banks.

These provisions were an important part of the powerful response launched by monetary authorities during the crisis to keep global financial markets open, curbing lofty dollar funding costs which had spiraled due to fear over counter-party risk.

Swap arrangements were revised and extended in November, 2011 as the euro zone debt crisis intensified, to ease the dollar funding pressure being experienced by some European banks.

China has said to have closed 18 swap arrangements worth a total of 1.6 trillion yuan involving different nations since 2009 (China Daily).

So essentially as these governments embark on their respective domestic money expansion programs, what they do to “hedge” against potential “shocks” (implicitly caused by such programs) has been to accommodate each other currencies through swap line deals.

Some currency war eh?