The first week of trading in 2016 has brought some bad news for the markets. While a declining stock market in China may worry investors, Sean Darby, Jefferies' global head of equity strategy says there's a bigger concern on hand: "The currency is the one to watch at the moment."
His comments came after China halted trading twice this week, fueling a sell-off on the global markets.
"The stock market has been relatively insulated to international investors, so I still feel it's a little bit out of the sort of whole conventional market," he said, speaking to CNBC's "Power Lunch."
"The yuan is entering the financial system at the moment, and I think that's where the major distortion is occurring in global financial markets."
Darby believes that if the Yuan further devalues there will be a large ripple effect.
"They've had a large amount of capital outflows, the yuan is weakening — which is making the dollar debt burden even worse — and also it's drawing down on their foreign exchange reserves," he said. In this "catch-22" situation, he says, China needs to let the yuan fall as fast as possible to clear the currency.