The Chinese Yuan’s (Renminbi, CNY) recent depreciation aroused concerns. It had been steady before the summer but all of a sudden it depreciated by a few thousand points against the U.S.Ddollar (US$). In the past five months, it went from an exchange rate of 6.37 to 7.00, a depreciation of exactly 10 percent.
When the CNY just began to decline, the USD index (DXY) stood at 101; now is 110, or a nine percent appreciation during the same period. Although the CNY depreciated in a stepwise manner while DXY appreciated gradually, the ultimate total percentage changes are basically comparable.
Since the CNY has been falling at a similar speed to other non-USD currencies, the impression of the “CNY crisis” has obviously been exaggerated, especially by the mass media. From a policy perspective, exchange rate movements of such an order of magnitude as 10 percent within two quarters are regarded as not small, but also not too rare….
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