(Bloomberg Business) -- China is the central focus of a global market rout that has left the Dow with its worst four-session performance since November 2008.

The surprise decision to devalue the Chinese yuan earlier this month served as a signal that perhaps markets were overly complacent about the condition of the world's second-largest economy. And in response to the slumping stock market and deterioration in domestic liquidity conditions, the People's Bank of China recently announced cuts to two of its policy rates and lowered the reserve requirement ratio.

As the direct linkages to the American economy and markets are not immense, some strategists are questioning whether the angst over China is overdone. Economists at Citi, for instance, did not see the chaos stemming from China as a big enough factor to derail a rate hike from the Federal Reserve in September. Meanwhile, Torsten Sløk , chief international economist at Deutsche Bank, indicated that he hasn't "seen a smoking gun chart showing why a slowdown in China will have a significant impact on the U.S. expansion" and suggested that the current slide made for an attractive buying opportunity.

But on an interview with BloombergTV on Tuesday, Amherst Pierpont Securities global strategist Bob Sinche asserted that the biggest uncertainty out there that's preventing global markets from making any forward progress is the notion that China has some unfinished business on the foreign exchange front.
"Markets are grappling around to try to find some sense of equilibrium, and I think the sense is there's still one big disequilibrium out there, and that's probably the Chinese currency," he said. "A 3% move in their exchange rate doesn't really do anything, and I think that's where the uncertainty continues to lie."

Sinche pointed out that the U.S. dollar has gained significantly more against the euro, Mexican peso, and the Brazilian real over the past year than the Chinese yuan:

Sinche speculated that Chinese policymakers originally intended for their currency to decline by a larger amount, but were forced to cap its losses as the effects of this move reverberated through other asset classes.

Implied volatility for yuan over a one-month, three-month, and six-month time frame spiked following the shock devaluation and retreated sharply thereafter, but has continued to pick-up amid the global equity market selloff:

Sinche posits that this suggests that investors are worried that the devaluation story isn't over yet.

The strategist acknowledged that there might not be a direct correlation between the U.S. equity selloff and concerns about another round of devaluation in China, but pointed to a more subtle reason why the decline in U.S. equities hasn't been met with a flurry of buyers this time.

"Investors have been in a position for a number of years now where you buy the dip," he explained. "And you buy the dip because growth was being sustained by growth in China, and the financial markets were being sustained by the Fed."

These two backstops look to be on their way out, according to Sinche, and China's search for a policy prescription befitting its economic woes has yet to resolve investors' anxiety that more weakness -- and a subsequent response from policymakers -- is around the corner.

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