Emerging economies’ currencies falter even as US dollar index descends
The Chinese yuan devaluation has been the major driver of the massive volatility in the foreign exchange markets over the last two weeks. Asian currencies have been negatively impacted the most due to the perceived risk of an impending currency war. Economies could compete against each other to have the upper hand in elevating export volumes and price value.
Falling commodity prices amid sluggish growth expectations in the Chinese economy have had a spiraling effect on Latin American currencies as well. A devalued yuan will have negative consequences on China’s imports, many of which are sourced from major South American countries. Crude prices have also been adversely impacted due to slow growth coupled with higher cost of crude imports for the Chinese economy.