What a weaker CNY means for FX globally

A weaker CNY versus the USD combined with risks of slower Chinese growth imply several relevant consequences for currencies globally. In a nutshell, the greatest impact is seen on emerging Asian and commodity currencies, with a small adjustment lower to forecasts for European currencies and the yen relative to the USD.

"Other Asian currencies face the greatest downward pressure from the CNY depreciation due to their large economic interdependency with China. Both the currencies of countries with a high degree of third-country export competition (Thailand and Korea) and those with a relatively high export share to China (Taiwan, Korea again and Malaysia) will face pressure to weaken", says Barclays. 

Commodity exporters such as Indonesia and Malaysia will be particularly hard hit as scope for margin compression is lower. Only India, with the lowest exposure to China in the region, escapes relatively unchanged.