Driver Of The Philippine Peso: Available Bias, Oil or the China’s Yuan? Part II

We are told today told that rising food and energy prices have been wreaking havoc to some emerging market balance sheets and thus have "caused" the fall in the respective currencies.

Korean Won, Philippine Peso and Indonesia’s Rupiah
Courtesy of Danske Bank

As we commented earlier, we are not persuaded with this argument because it seems to gloss over the other side of the trade-if emerging markets are expanding liabilities for social safety nets in face of “higher inflation”, have not the US likewise been throwing money at its financial markets in order to “reflate” the economy?

USD/Yuan courtesy of yahoo

We might be charged with the cognitive bias of “clustering illusions” or looking for pattern where there is none, BUT it does seem that the price actions of the Korean Won, Indonesia’s Rupiah and the Philippine Peso appears to have coincided with the movements of the Chinese Yuan, as we earlier argued at Driver Of The Philippine Peso: Available Bias, Oil or the China’s Yuan?.

The chart above shows that last September’s speed bump of the Yuan was nearly in consonance with the spike in the USD/WON, USD/PHP and USD/INR.

Today as the Yuan seemed to have paused from advancing against the US dollar, the aforementioned currencies lost meaningful ground.

USD Index courtesy of stockcharts.com

Now seen from the lens of the US dollar index, we uncannily observe of a pattern resemblance with the Yuan; the US dollar index paused from its recent downtrend and attempted a rally which appears to have fizzled out.

Could it be that once the US dollar index resumes its downdraft, the Chinese Yuan would recommence with its appreciation? And if the Chinese Yuan plays a more significant role than energy or food prices, as we suspect it to be, perhaps we might see these Emerging Asian currencies strengthen anew, despite higher oil or food prices?