In Nordine Naam’s weekly forex blog for FX-MM, Natixis’ senior forex analyst discusses the reasons behind 2016’s chaotic start. Indeed, the combination of a fall in the Chinese yuan, alongside the further correction of commodity prices, emerging currencies and leading equity indices, meant that high volatility took hold of the financial markets – which in turn meant that the US dollar appreciated against both emerging currencies and G10 currencies.
Yet, despite this wide-spread market volatility, Naam argues that the biggest threat in today’s climate is the sharp decrease in China’s foreign currency reserves. Certainly, the decrease reveals that the People’s Bank of China’s (PBoC) intervention in the foreign exchange market failed to stabilise the yuan, suggesting that the yuan may continue to weaken in 2016.
To read Naam’s forecast in further detail, click here