RMB Exchange Rate
The RMB exchange rate seldom fluctuates against the US Dollar, which indirectly implies that the Chinese government tightly controls the value of the Chinese Yuan (also known as the Renmimbi, RMB). Therefore, there is no good time to really aim for the best exchange rate for RMB, with the RMB oscillating around a narrow band against the US Dollar. RMB/USD exchange rate hardly seems exciting for forex traders – this despite the very fact that in 2005, the RMB-to-US-dollar pegging system is being switched to a basket of foreign currencies rather than against just the US Dollar.
With Chinese exports still steadily increasing despite concerns over quality, there is a fear that the Chinese Central Bank will continue to devalue the Renminbi to further drive Chinese exports. This possiblity cannot be ruled out, even through further depreciation of the Chinese Yuan/RMB is likely to be a series of minute downward adjustments.
At present, the global economy has just started resuming a growth trend after experiencing the worst financial crisis of the century. The prospects for a total revival still remains unclear, as uncertainties over the global financial markets have increased. To ensure China’s economic development, it is crucial that the RMB exchange rate remain stable for now – in the short term. This is required to help promote the growth of regional and world economies as well as maintain international financial stability. Of course, this must also benefit Chinese enterprises.
Therefore, expect the RMB exchange rate to stay against major currencies in the next few months still, till the point when the Chinese Government feels that the cloud has settled over the financial storm. Looks like the forex traders over at the China Foreign Exchange Trade Center will have plenty of sleep time.
