Inwestowanie.com — Barclays (LON:) analysts said in a note that shifting miniature currency positions from the euro and other European proxy currencies to (CNY) and its related currencies would be a better way to position itself amid the growing likelihood of higher tariffs on China under the novel US administration.

Highlighting China’s vulnerability to tariffs, Barclays noted that despite these risks, the yuan and its surrogate currencies are performing well compared to other currencies, making it short-favorable.

Last week’s dollar rally was driven by geopolitical tensions, faint economic data from Europe and political instability in France.

However, Barclays noted that major European currencies such as the euro and British pound performed significantly underperformed compared to yuan-linked movements, as did other G10 currencies such as the Australian dollar (AUD) and New Zealand dollar (NZD), and Scandinavian currencies , such as Norwegian krone (NOK).

In emerging markets, China-sensitive currencies, including the South Korean won (KRW), Taiwan dollar (TWD) and Thai baht (THB), are outperforming Central and Eastern European (CEE3) currencies such as the Polish zloty (PLN) and Hungarian forint (HUF).

Latin American currencies such as the Peruvian sol (PEN) and Chilean peso (CLP), which are highly exposed to demand for Chinese goods, also showed resilience.

“Not only is CNY too stable for the amount of trade risk facing the Chinese economy, but the market also appears unprepared for such risk through natural Chinese proxies, whether in G10 countries or emerging markets” – wrote the analyst.

The bank anticipates a potential decline in the value of lagging currencies such as AUD, NZD and NOK in G10 markets and KRW, TWD and THB in emerging markets if Chinese tariffs materialize, increasing pressure on these economies.