Gradual Yuan Advance May Offer Boost to Emerging Currencies
“China’s yuan is the key currency cross for most EMs; they trade more with China than they do with the US.”
Photographer: Nelson Ching/Bloomberg
China’s new-found tolerance for steady yuan appreciation looks set to re-accelerate a rally in emerging-market currencies, as investors brace themselves for lower US interest rates.
Supporting such expectations is EM currencies’ sensitivity to changes in the yuan. A Bloomberg analysis shows that over the past year, for every 1% yuan move, the Thai baht, Malaysian ringgit, Chilean peso, Mexican peso and Brazilian real have moved closely in tandem.