CNY devaluation impacts on Commodity currencies

CNY depreciation also likely will accentuate weakness in commodity currencies and we forecast AUD, NZD and ZAR will depreciate 7-8% versus the USD by the middle of next year. A reduction in Chinese demand for commodities, as their price in CNY terms rises, likely will worsen already low terms of trade for these commodity exporters. 

According to Barclays, this effect is likely to be greater if, 

i) EM Asia currencies follow CNY depreciation to maintain export competiveness 
ii) The recent Chinese policy changes are a reflection of unexpected domestic activity weakness. 

Indeed, the commodity currencies noted above have extremely high trade weights with China and EM Asia in our effective exchange rate indices. Finally, high sensitivity to poor global sentiment is also likely to place downward pressure on these currencies as investors become less willing to fund their current account deficits.