China Currency Depreciation: Emerging Markets Hardest Hit

The move by the People’s Bank of China (PBoC) yesterday to devalue the renminbi (RMB) by 1.9% was a shock to the market but we believe the currency remains resilient. There is, however, pressure on emerging market and Asian currencies.

Some commentators have viewed the recent moves by the PBoC to expand the RMB trading band as the first step in a structural depreciation of the RMB. We do not believe this is the case, although we do think China is showing signs of real concern over slowing economic growth.

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