| A depreciation of 1 per cent in the Chinese yuan leads to a decline of 0.6 per cent in commodity prices, according to Bank of America. This relationship with the currency is the strongest for commodities such as copper and platinum, of which China is the world's dominant consumer, the US bank's strategists wrote in a report dated January 25.
A cheaper yuan will erode the purchasing power of the Chinese, pushing prices down and outweighing any benefit from easier financial conditions that a devaluation may bring, they said. Bank of America analysts compared the moves on the Bloomberg Commodity Index with the yuan's changes against the US dollar and a basket of other currencies to calculate the so-called beta, which measures one security's sensitivity to another..............................................Full Article: Source
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