LONDON (BLOOMBERG) - A severe climate shock in the next 50 years will wreak havoc on the global economy and upend currency markets as we know them, according to a new study by Barclays.

Analysts at the bank have published a model of emissions scenarios, along with predictions for how foreign exchange markets will be affected. In the most extreme case, they predict the Chinese renminbi and Japanese yen could drop by more than 50 per cent by 2070 because of the economic toll stemming from rising sea levels, air pollution and crop failure.

It is a dramatic estimate entailing unprecedented disaster and human suffering in some of the world's most populous cities, if global warming runs unchecked.

The Barclays report also shows how quantitative finance is grappling with the probabilities of climate change in asset classes slower to adopt environmental, social, and corporate governance (ESG) as a trading theme, such as the US$6.6 trillion-a-day (S$9.2 trillion) foreign exchange market.

"Markets are effectively priced for a 2 deg C world, taking the more optimistic view on the future," wrote analysts Themistoklis Fiotakis and Wen Yan at Barclays. "We believe our estimates help to illustrate the scale and cross-country variation in the FX risks ahead."

With any financial model, especially one running decades into the future, there are a lot of unknowns and caveats. In their study, the analysts used previous studies that link climate change to economic growth forecasts, focusing on productivity and capital flows. From there, they derived predictions for currency markets.

While the focus of the report was on worst-case scenarios, the analysts acknowledged there is a wide range of potential outcomes. Policy action, like carbon taxes, can reduce emissions and slow the pace of global warming, they wrote.

"Our panel estimates help broadly translate country growth damage into for FX (foreign exchange) depreciation," they wrote.

Here is a look at some of the main takeaways:

• Japanese yen

Barclays said geography is why the yen is "one of the most vulnerable currencies in scenarios of extreme climate change". They cited the risk to densely populated cities like Tokyo, if sea levels rise dramatically. In the worst case of a 5 deg C rise, the yen could fall by an average of 11 per cent each decade, according to the model.

• Chinese renminbi

"Our estimate points to 5 per cent to 7 per cent Chinese renminbi depreciation over the next 10 years, which could worsen to more than 10 per cent per decade over time," wrote the analysts. They flagged air pollution and the risk that policymakers will prioritise rapid economic growth over the environment.

• US dollar

The US dollar is less exposed to climate change risk because the economy is in a better position to adapt, wrote the analysts. "Exchange rate moves are relative, which means the USD probably benefits against most economies," they wrote.

• Euro and Australian dollar

In the Barclays study, the euro and "surprisingly" the Australian dollar are outperformers. The analysts said "openness to trade" was a big reason why some economies and exchange rate would be better able to adapt.

Their model predicted 3.9 per cent average increase per decade for the euro and 2.1 per cent for the Australian dollar in the worst-case scenario.