This summer, China frightened the herd when it devalued its currency but confidence returned,

and the Renminbi made back about half of its loss, a loss that anyway wasn't all that big to start with, with just 3%.

Frankly that's pretty much nothing compared with the usual emerging market currency devaluation.

But today, the Renminbi officially closed back below the low that it closed out in August,

given up all of the autumn bounce, or I should say it is still a little bit better than the worst point reached intraday during summer.

Now, optimism and pessimism about the currency reflected in the behavior of the offshore traded Renminbi,

which isn't limited by the official onshore 2% daily band.

The red line here shows the value of the domestically traded Renminbi against the dollar,

and that's known as the CNY after its Bloomberg initials and the offshore currency the CNH here in blue,

and the gap between the two was very very wide after the first devaluation back in the summer.

You can see the size of that there.

That was, because traders were betting that it was the start of a generalized deep basement of the currency.

Fear was that China would attempt to weaken in order to ease the pressure on its exporters as its economy was slowing,

that then hit industries worldwide, which compete with Chinese companies,

as well as hurting foreign suppliers of everything from durable goods to iron ore, whose dollar-based products now costs more in Renminbi.

The gap has now widened right back out again,

having briefly narrowed to nothing in fact slightly reverse there in the summer, sorry, in the autumn

as the fierce calmed, like gaps now right back out again

where it was, or very close to where it was in August, cause the data that came out today showing capital outflows

and falling imports and exports again stoking fears that the Renminbi is going to be allowed to keep on weakening.

The direction of the currency is particularly important to countries such as Brazil or Australia, which sell commodities to China.

Steelmakers are already complaining that China is trying to export its way out of trouble,

dumping excess capacity abroad, rather than shutting down unprofitable facilities at home.

Although the currency weakened, the louder Chinese competitors are likely to shout.

From a investor perspective, weaker Renminbi particularly matters,

cause it adds global deflationary pressure, but in the short term,

weaker Renminbi is most obviously bad for commodity prices also for emerging markets.

On here the red line shows the gap between the onshore and the offshore Renminbi against the dollar,

and the blue line shows the relative performance of emerging markets against developed markets.

As the gap between the two initially widened out and then started to narrow again during the autumn,

you can see that the confidence then returned and emerging markets beat developed markets.

People were happy again about China, but for the past two months, that gap has been widening out again,

that's the red line and as a result, emerging markets have been underperforming the developed markets.

Emerging markets at the moment do look fairly cheap, mining shares are back at levels

that were last seen in August 2003, when priced in dollars.

Whether they are by, depends on all sorts of factors from Brazilian politics to mine closures and dividends,

but chief among those is the performance of China and its currency.

You're really taking a punt on what'll happen to this red line here.