China’s Currency Struggles Spell Trouble Across Emerging Markets

A weaker yuan has wider repercussions for emerging markets, which have endured two years of elevated inflation, jitters over the Federal Reserve’s monetary tightening and the prospect of recession in key western markets. The Chinese currency, with its 30% weight in the MSCI Emerging Markets Currency Index, is pushing the gauge to the worst year since 2015. In fact, the offshore yuan’s 120-day rolling correlation with the emerging world hovers near the highest level in two years, underscoring its impact.