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The Brazilian real will be the strongest emerging-market currency performer in the event of a U.S.-China trade deal, while the Thai baht and Israeli shekel are among those that will be the least responsive, a Bloomberg analysis shows.
Based on sensitivity to the yuan during periods of trade-newsflow driven markets, commodity-exporter currencies including the Chilean peso and the Russian ruble showed the most consistent and largest moves. Asian currencies including the won and the ringgit also show consistently large moves, while those ranked at the bottom were all lower-yielding commodity importers.
Investors are preparing for the outcome of the latest round of high-level talks between the world's two largest economies, set to take place during the week of Oct. 7.
The study of 19 currencies covers periods from mid-2017 when the yuan moved 2% or more over a short period of time. Below is a table showing the results of the analysis, click here for more on the methodology used.
| Currency | Avg. move versus 1% move in yuan (%) | Avg. move/ standard deviation (ratio) |
|---|---|---|
Highly Consistent | ||
| BRL | 1.3 | 2.7 |
| CLP | 1.0 | 2.6 |
| COP | 0.9 | 1.9 |
| RUB | 0.9 | 1.7 |
| KRW | 0.6 | 1.6 |
| MYR | 0.5 | 1.6 |
| SGD | 0.4 | 1.9 |
| TWD | 0.4 | 1.7 |
| IDR | 0.4 | 1.5 |
Moderately Consistent | ||
| TRY | 1.5 | 0.9 |
| ZAR | 1.1 | 1.2 |
| HUF | 0.8 | 1.2 |
| PLN | 0.6 | 1.2 |
| CZK | 0.6 | 1.1 |
| MXN | 0.6 | 0.8 |
| INR | 0.5 | 1.3 |
Inconsistent | ||
| THB | 0.3 | 0.5 |
| ILS | 0.2 | 0.6 |
| PHP | 0.2 | 0.4 |
Source: Bloomberg
Key Insights:
- The Brazilian real has moved 1.3% for every 1% move in the Chinese yuan, in the six episodes over the past two years
- South Korea, Malaysia, Singapore and Taiwan, which have close trading relations with China, also rank high
- The Turkish lira average was distorted by one outsized move. In reality, it has only shown moderate consistency with the yuan, though moves tend to be in the same direction
- NOTE: Simon Flint is an EM macro strategist, who writes for Bloomberg. The observations he makes are his own and not intended as investment advice
To contact the reporter on this story: Simon Flint in Singapore at sflint18@bloomberg.net
To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Cormac Mullen
©2019 Bloomberg L.P.
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