Weakness in China has caused the Australian dollar to plunge. The Aussie dollar is down 1.2%. The Argentinian peso has been devalued by 15%. This is the worst decline since 2002. The South African rand lost 1% to about 11 rand per U. S. dollar; this is a five-year low. The Turkish lira remains under pressure, declining about 1.1% in spite of reports of Turkish central bank intervening to support the lira. Along those lines, the Russian central bank likely intervened to support the ruble from further fall.
Movement in currencies gave an early warning that led to warning of issues in emerging markets. The sum total of the foregoing is that investors are shunning risk and embracing safety. This is confirmed by strength in U. S. Treasurys.
The euro is staying firm against the U. S. dollar. This indicates that the probability of the currency turmoil developing into a huge crisis is low.
Relationships between currencies have a predictive power for the U. S. stock market. The sum total of the currency movements so far is that any market correction in the U. S. and Europe will be shallow. When this correction ends in emerging markets, it will be a buying opportunity for the long-term investor. However, it goes without saying that this conclusions comes with a caveat that thing can quickly change as new data comes in. Thus when the correction is over we could see a lean and meaner market which will take th