Published by Mark Smith-HalvorsenExcessive fiscal tightening can kill currencies, according to John Normand, global head of foreign exchange strategy at JPMorgan.Speaking to the Financial Times, he explained that while it is conventional wisdom that trade deficits are currency-negative, this does not mean that taking action to reduce the deficit through fiscal tightening will necessarily strengthen currencies."But the converse – that fiscal tightening strengthens currencies – is not always true, especially if fiscal tightening begins from high deficit levels which may precipitate a financial crisis," he said.Mr Normand pointed to Europe's experiences with fiscal tightening in the late 1980s were evidence of the damage that can be done to currencies during moves towards growth.In the UK, reducing the budget deficit is the primary election issue for the three main parties, and a Financial Times poll this week showed that markets have reacted with alarm at the prospect of a three-way hung parliament, which may leave many of the more daring debt reduction policies in permanent stalemate.For more information on foreign exchange treasury services and risk management, visit our Corporate FX site