Yen Intervention and Yuan Adjustment

- "Japan’s intervention in foreign exchange markets last week was a response to the slow pace of CNY appreciation and the yen’s rapid appreciation. Unlike the yuan, the yen is not an undervalued currency but it had appreciated faster than other Asian currencies this year."
- "China’s revealed preference for real appreciation via inflation rather than nominal exchange rate appreciation is paying off. Wages are rising rapidly and the current account surplus is falling as the real effective exchange rate rises. We forecast a current account surplus of only 2.7% of GDP next year."
- "The appropriate metric for assessing currency values is the real effective exchange rate. On that basis, most Asian currencies appear undervalued, but the CNY’s undervaluation is relatively modest in comparison with some of its neighbours. We consider two estimates of the deviation of the real exchange rate from equilibrium and the larger estimate is only 13.5%. That implies a 24% appreciation in CNY/USD over the next five years, which is consistent with our forecast. But that may overstate the necessary extent of CNY appreciation."

DeutscheBank Global Economic Perspectives 20100922

No comments:

Post a Comment