(Bloomberg) -- The fate of emerging-market stocks and currencies has become more closely tied to the Chinese yuan, thanks in part to the trade war.
The correlation between the yuan and developing-nation stocks and currencies is holding near records reached in the past two months. While some of that can be attributed to the increasing influence of the Chinese economy in global trade, it’s also happening as the U.S.-China trade war dictates sentiment for risk assets, with the conflict often dominating market narratives on a given day.
“The yuan’s moves directly reflect the market’s optimism or pessimism toward the U.S.-China trade dispute,” said Masakatsu Fukaya, an emerging-market currency trader at Mizuho Bank Ltd. in Tokyo.
Trade optimism has grown again, with Chinese working-level trade officials scheduled to travel to the U.S. this week ahead of a meeting of top negotiators in October. U.S. officials have discussed offering a limited trade agreement to China that would delay and even roll back some U.S. tariffs.
