USD/CNY: Weak Yuan Would Most Impact Southeast Asian Currencies

China watchers calling for Beijing to loosen its grip on the besieged yuan need to be mindful of the risk that it unleashes a chain reaction rocking emerging- and developed-market currencies alike, according to some strategists.

Most under threat are the currencies of Asian neighbors such as South Korea and Thailand, where China is the number one trading partner. But a suddenly weaker yuan may have a much wider impact, turbocharging renewed strength in the dollar, the traditional wrecking ball for developing nations’ foreign-exchange markets.