...It is important to note that 49% of the Index is made up by CNY and HKD. As we are not currently of the bias that these currencies would see significant (if any) depreciation even if the EM sell-off were to become more aggressive in Asia (as a reminder, during the major ADXY collapse in 2008, USDCNY and USDHKD remained essentially unchanged)
As a result, if we were to see a continued bearish development in the ADXY, it would suggest the other currencies in the Index (INR, IDR, KRW, MYR, PHP, SGD, TWD and THB) would see greater weakness then the overall weakness. We will be watching for any developments closely...