Indeed, there is reason to expect this to impact emerging markets very widely. Looking at the chart from Rathbones below, it is clear that many commodities based countries could be badly impacted by a falling renminbi.
Fathom Consulting is firmly in the skeptical camp too, expecting China to keep retuning to the monetary well.
“For over a year, we have argued that China’s policy makers would eventually devalue the RMB,” Fathom said. “Overnight, this process began. Devaluing its currency by almost 2% against the US dollar, China’s central bank enacted the largest RMB depreciation since the mid-1990s. We believe that this process is far from complete. The RMB has further to fall from here.”
If Fathom and other like-minded people are right, it promises to be a bumpy ride for the global economy, particularly in emerging markets.
