Asian currencies move towards CNY

And this has kept Asian currencies resilient in the face of recent EUR weakness, according to HSBC.

However, this will also mean that Asian currencies will be vulnerable if ever CNY suddenly weakens.

Here's more from HSBC:

Asian currencies appear to be responding more to the USD-CNY fix than previously. Meanwhile, the relationship with EUR, though still strong, has diminished somewhat. Gravitation towards CNY has helped Asian currencies remain resilient in the face of substantial EUR weakness in recent weeks. Should CNY continue to independently appreciate, then risks to the topside in USD-Asia should be contained.

While recent CNY strength has been helping offset EUR weakness, our findings also show that Asian currencies would be asymmetrically vulnerable if CNY were to unexpectedly weaken. By currency, we find the strongest shift towards CNY to be by IDR and MYR.

As the CNY slowly internationalises it will act as a regional anchor for Asian currencies. Much like the EUR can, for example, pull GBP or the SEK into its orbit so will the CNY for other Asian currencies. From a long-term perspective this development will also be symptomatic of the CNY slowly but surely demonstrating reserve currency characteristics.