FXStreet (Guatemala) - Cristian Maggio, Head of Emerging Markets Strategy at TD Securities explained just like the markets ended last week, we have started off on poor sentiment both in Asia and Europe, while the US is closed for Martin L. King day until tomorrow. Key Quotes: "Equity markets are again on the back foot, as well as commodities, not helped by the CNY fix that came in at the lowest level in nearly two weeks at 6.5590 to the dollar today. This has had beneficial effects on CNY and CNH trading, although the yuan fix remains below traded USDCNY." "At the time of writing, the pair is appreciating 0.09% to 6.5791 vs the greenback, while USDCNH is less directionally clear. A fairly strong move towards 6.5730 (daily low) accompanied early trading, with the pair turning bid before the London open and now exchanged lower again at around 6.5830. The result is that the CNH-CNY spread is around 40 pips, a level that is significantly below early Jan and Dec’s, and also some 230 pips lower than the average levels in November 2015." "Another piece of news adding to volatility today is the announcement from the PBoC that a new RRR that will go live on 25 Jan will be added for onshore banks that accept renminbi deposits from offshore banks. The PBoC has not specified yet the level of the new reserve ratio, but we suspect it will most likely be the same as the RRR for large onshore banks at 17.5%. The real question is what does this additional layering in Chinese rates mean? As domestic rates are quite lower than the offshore ones, we don’t see much scope for offshore RMB being deposited locally. So the overall impact should be marginal. But if anything, the new RRR should allow the PBoC to close any possible loopholes in its broader strategy to make shorting the CNH ever more difficult. In this context, we struggle to see the persistence of risk aversion as being entirely related to the China concerns, at least for the short term. Clearly, expectations that the China woes will take their toll on growth and financial market stability there also translates into the expectation that more reserves will be burned to achieve the goal of stemming renminbi pressure and keep the onshore-offshore spread near zero. With this in mind, we look at the oil price dynamic as a more immediate concern for risk appetite. We do recognize that the China outlook has a sizeable impact on commodities and especially oil, but also continue to see the market heavily oversupplied, which is a more compelling topic than the sole Chinese juncture may suggest. With Brent crude that continues to head south—even though Brent is recovering a modest 0.2% today—there is not much respite for EM economies, all of which, regardless of their status, exhibit positive asset price vs oil price correlations." For more information, read our latest forex news.