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With global stock markets and the U.S. Dollar selling off sharply over the past 24 hours analysts and commentators are busy looking for a suspect to blame.

The rise of U.S. Treasury yields is a popular target with analysts suggesting the rise in yields decreases the attractiveness of stocks as an investment asset.

U.S. Treasury yields have recently peaked at 3.23%, snapping a long-term downtrend in the process, while global stock markets sold off sharply with some Asian bourses registering 4% declines.

The Euro-to-Dollar exchange rate has meanwhile turned from the current week's low at 1.1460 to record a high at 1.1572.

U.S. President Donald Trump has meanwhile laid the blame at the door of the U.S. Federal Reserve who believes are raising interest rates too aggressively, a decision that will likely slow U.S. and global growth.

China is however the answer to the sell-off argue others, including Simon Derrick, Chief Currency Strategist with BNY Mellon.

Derrick has been Looking at the news headlines heading into the previous U.S. open, when the sell-off was triggered, and notes the main events had been warnings overnight from Treasury Secretary Mnuchin about the devaluation of the Chinese Renminbi and warnings from the IMF about Chinese growth.

"Both, in turn had fed into concerns about a rise in the USD beyond CNY 7.0 and the potential this might have to feed through into broader market volatility," says Derrick.

The previous 24 hours had also seen President Trump repeat his threat to place tariffs on an additional USD 267 bn of Chinese imports.

"In other words, the most likely cause for the sharp change of mood at the US open was concerns about Chinese growth rather than anything else. This is pretty consistent with previous observations of how markets have behaved this year," says Derrick.

Derrick cites further evidence that this was the case comes from looking at events at the start of the European morning when a fleeting recovery emerged following comments from China’s MOFCOM that China is open to restarting trade talks with the US.

And how does Derrick believe FX markets will perform under the current conditions?

"Historically, the currencies that have typically outperformed during times of market stress have been the USD and the JPY. However, it is noticeable that the USD has not performed well against in many of its G10 peers over the past two days with even the EUR making ground over the past two days despite fresh headlines out of Italy," says Derrick.

Derrick says it is certainly arguable that this might be connected to the renewed criticism of the Fed by President Trump and it is true that there has been something of a rebound in the 2019 Fed funds futures complex in recent days.

"However, given the somewhat patchy link between shifts in US yields and the USD’s performance against mainstream currencies this year, it would be wrong to place too much emphasis on this point. Instead, the move could be no more than a function of investors simply taking positions back to a more neutral stance as normally happens in a risk off environment," adds the strategist.

Meanwhile, our assessment of the analyst response to the current bout of turmoil is that it is temporary.

Something U.S. Treasury Secretary Steven Mnuchin agrees with.

“Markets are not efficient and markets move in both directions and at times they overshoot in both directions,” Mnuchin said early Thursday in an interview on the sidelines of the International Monetary Fund annual meetings in Bali, Indonesia.

“The fundamentals of the U.S. economy continue to be extremely strong, I think that’s why the stock market has performed as well as it has. The fact that there’s somewhat of a correction given how much the market has gone up is not particularly surprising,” says Mnuchin.

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