INSUBCONTINENT EXCLUSIVE:
By Enda Curran, Christopher Anstey and Eric LamIf you thought the first half of the year was rocky for emerging market economies, brace
for turbulence ahead with dollar strength and a weaker Chinese currency set to keep investors on edge.
The yuan has slid six percent against
the dollar since June and analysts say if further losses materialize, accompanied by rising Treasury yields and greenback, that will be a
Investors will be tempted to pull capital out of emerging economies across the board; policy makers around the region will be forced to
1, Deutsche Bank AG said it expects the yuan to trade at 6.95 and 7.40 against the dollar by the end of 2018 and 2019 respectively, compared
with a previous forecast of 6.80 and 7.20
Last year was politically important so the authorities had a particularly tight grip on capital outflows
Trump were actually to impose further tariffs, that would cause a further renminbi depreciation
USD/CNY spot rate and the CFETS index to fluctuate in wider ranges over time
managed and more floating
In fact, the three-month realized volatility of the renminbi has become very similar to that of the yen as well as other Asian currencies
expected the renminbi to weaken but the pace of depreciation has turned out to be faster than we expected," economists Zhiwei Zhang and Yi
"The PBOC may step in to smooth the path of depreciation but we doubt they will intervene heavily to reverse the trend of depreciation.
Andy
Wong, Pictet Asset Management:As its economy re-balances, China is on the verge of having a current account deficit
Our concern is more on whether there will be a one-way expectation of sharp decline for the renminbi, and the related damage to private
investment and market sentiment, rather than higher two-way volatility
So far, China FX reserves are not showing a need to panic
For EM risk assets, and global allocation, we believe it is important to be more selective, and be selective on sectors rather than just
For example, we have seen inflows into select EM Debt recently, because of the underlying economy and sector exposures.
Stephen Innes, Oanda
Corp:China continues to be the dominant force and the dominant driver of investment sentiment in the region
As China goes, the rest of the emerging markets, especially in Asia, seem to follow suit.
Ian Hui, J.P
China appears to be willing to let the yuan be driven more by market forces, as it does relieve some pressure on the economy through cheaper
However, Chinese officials will still be wary about letting the yuan weaken too much, causing issues for capital flight and financial
domestic financial stability
