Rupee less sensitive among Asia currencies to weak yuan: CS

If yuan continues to depreciate, it will keep dollar and rupee under pressure, says Ray Farris of Credit Suisse.Read more at: Rupee is robust; wont fall much on yuan decline: Experts“However, the rupee should ultimately prove to be a little bit less sensitive than some of the other Asian economies that both compete more directly with China and have China as a larger end use market,” he tells CNBC-TV18.Talking about the effects on Asian markets, he says the most vulnerable countries are the ones who have an export basket similar to China’s and export a lot to China.Read more at: Good if rupee weakens to 65-65.5/USD on yuan dip: Stanchart “In Asia, the countries that stand out on those criteria are Korea, Taiwan and Malaysia and to a lesser extent Thailand as well from an export similarity perspective,” he explains.Below is the transcript of Ray Farris’s interview with Latha Venkatesh and Sumaira Abidi on CNBC-TV18.Latha: This was the second consecutive day of the Chinese devaluation. Who do you think are going to be the most vulnerable candidates in terms of currencies? A: The most vulnerable candidates are those that both have an export basket that is most similar to China and exports a lot to China as an end user market. In Asia the countries that stand out on those criteria are Korea, Taiwan and Malaysia and to a lesser extent Thailand as well from an export similarity perspective. So, these are countries where if the Chinese yuan continues to depreciate, competitiveness pressures and increase in cost in the Chinese market will hurt most. Latha: The Indian rupee itself has fallen about 2 percent over the last 48 hours if you please, yesterday and today. Do you see the rupee depreciating more? A: If the Chinese yuan is going to continue to depreciate then that seems somewhat likely right now. Some further depreciation in the renminbi then it is going to keep almost all of dollar Asia under pressure including the Indian rupee. However, the rupee should ultimately prove to be a little bit less sensitive than some of the other Asian economies that both compete more directly with China and have China as a larger end use market.Sumaira: What about the yuan itself, how much further downside do you see perhaps this month, this quarter and for the year itself?A: Right now it is day two into new regime. It is tough to know exactly how the government is going to work this out. Our guess is that they are trying to depreciate the nominal effective exchange rate taking it probably back to its trend level after it became more than 2 standard deviation rich which ran last week. That would employ maybe 1-2 percent lower on a TWI basis after which it didn't probably trade a lot more like Singapore dollar, becomes kind of a function of what happens to the broad US dollar. So, in terms of the valuation if you will, it is pure death, but from here to kind of the middle of the trend would be another 1 percent or so on a TWI basis.