Exchange Rates

The official currency of the People's Republic of China (PRC) is Renminbi (meaning in Chinese: "people's currency"). The People's Bank of China, the PRC's monetary authority, issues the Chinese currency. The official ISO 4217 abbreviation of China's currency is CNY, but it is also abbreviated as "RMB". Colloquially, the Chinese currency is also called Yuan and Kuai.

During the previous decade, Mainland China's Currency was pegged to the U.S. dollar at 8.28 RMB. On July 21, 2005, it was revalued to 8.11 per U.S. dollar, following the removal of the peg to the U.S. dollar. The revaluation resulted from pressure from the United Stated and the World Economic Council.

The People's Bank of China also announced that the Renminbi would be pegged to a basket of foreign currencies, rather than being strictly tied to the U.S. dollar, and would trade within a narrow 0.3 percent band against this basket of currencies. China has stated that the basket is dominated by a group of international currencies including the U.S. dollar, euro, Japanese yen and South Korean won, with a smaller proportion made up of the British pound, Thai baht and Russian ruble.

Chinese Currency - 100 RMB note

History of Chinese Currency

The renminbi was first issued shortly before the takeover of the mainland by the Communists in 1949. One of the first tasks of the new communist government was to end the hyperinflation that had plagued China near the end of the Kuomintang era.

During the era of the command economy, the value of the RMB was set to unrealistic values in exchange with western currency and severe currency exchange rules were put in place. With the opening of the mainland Chinese economy in 1978, a dual track currency system was instituted, with renminbi usable only domestically, and with foreigners forced to use foreign exchange certificates. The unrealistic levels at which exchange rates were pegged led to a strong black market in currency transactions.

In the late 1980s and early 1990s, the PRC worked to make the RMB more convertible. Through the use of swap centers, the exchange rate was brought to realistic levels and the dual track currency system was abolished.

The RMB is convertible on current accounts, but not capital accounts. The ultimate goal has been to make the RMB fully convertible. However, partly in response to the Asian Financial Crisis of 1998, the PRC has been concerned that the mainland Chinese financial system would not be able to handle the potential rapid cross border movements of hot money, and as a result, as of 2003, full convertibility remains a distant goal.

Exchange rate of the American dollar vs. China's Currency (Renminbi)

From 1994 until July 2005, the policy on currency has been to peg informally the value of the renminbi against the value of the United States dollar. This policy was praised during the Asian financial crisis of 1998 as it prevented a round of competitive devaluations.

In 2003, this policy came under criticism by the United States. The fall in the value of the dollar caused the value of the renminbi to fall also, making mainland Chinese exports more competitive. This led to some pressure on the PRC from the United States to increase the value of the RMB in order to encourage imports and decrease exports. This is a policy that some feel would preserve manufacturing jobs in the United States. The G7 and European Union are also in favour of a re-evaluation of the exchange rate.

The PRC government has resisted pressure to increase the value of the RMB, out of concern that it would cause mainland Chinese jobs to disappear and would also expose domestic banks to currency risks that they are not prepared to handle. Many economists believe that only fixed exchange rates or floating exchange rates are stable over the long term, because a one-time change in exchange rates might cause speculators in the future to take positions on possible exchange rate fluctuations which would lead to pressure to completely float the currency.

The PRC government has also claimed that, while mainland China runs a large surplus with respect to the United States, its overall balance of payments is not out of balance.

Some independent analysts conclude that mainland Chinese currency is undervalued, because the People's Republic forbids citizens from moving their currency abroad. If this sort of financial diversification were allowed, the massive outflow of yuan could have a substantial effect on the currency.

Within the United States, the issue of appreciating the RMB is also controversial. Manufacturers and textile producers are in favor of appreciating the RMB. However, many American companies that depend on mainland Chinese factories to supply inexpensive products and components, such as aerospace companies, computer manufacturers, discount retailers, and other companies are against appreciating the RMB. Furthermore, many economists have pointed out that manufacturing jobs have been declining in the United States for decades. Some people have suggested that blaming the lack of job growth on the value of the RMB is merely a convenient misdirection on the part of the vested interests, including the George W. Bush administration, inefficient businesses, and labor unions fearful of competition.

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Financial consequences of revaluating or floating China's Currency

The financial consequences of free valuation are complicated. Many economists believe that appreciation of the yuan would cause the PRC government to buy fewer United States treasury bonds, causing bond prices to fall and bond yields to rise, hampering improvement in the U.S. economy. The ensuing depreciation of the US dollar might price oil out of the reach of the American economy, causing stagflation, a collapse of US oil dependant industries, massive unemployment and other dire economic consequences.

However, the potential risk to global balances from mainland China's inflexible exchange rate would be more critical if the PRC relaxed its controls on short-term investment flows without first introducing exchange rate flexibility. This is because shifting exchange rates nullify expected profits from investment flows seeking to take advantage of higher interest rates in another country. Without flexibility, speculative flows could quickly become large, as they did during the Asian financial crisis, and threaten economic stability and orderly world trade.

Watch those currency exchange rates:-

While the lower cost of almost everything from property to petrol attracts the British buyer to sunnier climes, it is all-too easy to get burnt by the currency transactions.

Raising the money to buy a home through the sale or remortgage of a UK property may be relatively simple for the savvy British homeowner, but dealing with currency exchange other than for small amounts of holiday spending money is less familiar territory. Get the timing wrong on a currency transaction and the price of that bargain home can shoot up faster than a whole year's house price inflation in the UK.

Homebuyers who are meticulous about getting the best mortgage rates when buying a property in the UK seem to lose their diligence glasses before buying abroad, according to foreign exchange businesses. All currencies fluctuate. The Australian and New Zealand dollars can fluctuate by 10 per cent a month, according to foreign exchange (forex) specialist HiFX. Even the euro can move by 2-3 per cent.

HiFX says that it usually takes between six and eight weeks to complete a property purchase abroad and that even over one month the currency movements can have a dramatic effect on the final price. Mark Bodega, marketing director for HiFX, says: 'In December 2005 the value of the euro increased by 3 per cent against the pound. This would equate to a loss of euros 6,000 [pounds 4,000] on a typical euros 200,000 [pounds 135,000] property in Spain.'

Suzanne Sullivan, marketing manager for Currencies Direct, says its research suggests that buyers of foreign proper ties have collectively lost euros 1bn by not taking care over the exchange rate.

Forex companies encourage buyers to think ahead about the exchange issue so that they know how much they can really afford to spend on their dream home. They also recommend that buyers shop around before automatically using their own bank to do the transaction. Sullivan says: 'The rate you are likely to get from your bank is the same as if you were buying holiday money. Forex specialists offer commercial rates to private individuals.'

The least risky way to exchange the money is if the full amount can be exchanged straight away (called a 'spot transaction') and is kept in a euro account (or other relevant currency) until it is needed. Property buyers need to weigh up what might be lost in interest over the period as euro base rates are 2.5 per cent compared with the UK's 4.5 per cent, for example.

Buyers who do not have or do not need all the money up front because they have chosen to buy a new property 'off plan' and need to make staggered payments to the developer, can use a forex service to fix the exchange rate for 18 months to two years. This is called a 'forward transaction'. You pay a deposit, usually 10 per cent up-front, and the rest when the contract expires. 'This means buyers know exactly what they are paying for the property,' says Sullivan.

The drawback is that buyers also miss out if the exchange rate goes in their favour. But, says Sullivan, 'Since there is no way of knowing which way it will go, fixing gives you peace of mind.' Purchasers with more time or who need to make staggered payments might prefer the fixed exchange rate option.

Consumers should be aware that foreign exchange services are not regulated and the forex companies and banks cannot give you advice. They can give you information but it is then up to you to decide what is best for your situation.

Euro exchange rate is a standard currency parameter :-

Euro has become one of the major currencies of the world ever since its inception and has performed very well in the foreign currency exchange rate markets. It has always compared favorably with the other major currencies of the world – be it the british pound exchange rate or the us dollars exchange rate. The australian dollar exchange rate can also be recalled.

Euro is also higher in value compared to many other currencies of the world. Euro is the official currency of the Eurozone, which comprises of some of the most naturally enhanced and technologically advanced countries like Austria, Belgium, European Union, France, Germany, Greece, Italy, Portugal and also Vatican City.

The Canadian Dollar is the currency in Canada. The euro canadian dollar exchange rate was last updated on November 10, 2008 by the International Monetary Fund.
As a matter of fact, the entire euro exchange rates were last updated on November 10, 2008 by the International Monetary Fund. The Rate conversion factor has 6 significant digits.

However, it is interesting to know that the bank of canada exchange rates are only notional quotations that are not applied for buying or selling in Forex markets but intended only for statistical or analytical purposes.

Euro is the currency of European nations but it has a global impact in the world economy. Dow jones especially mentions its name and gives due impotance to it. After US dollar, euro is the currency that leads most of the nations of the world. But if you analyze it, you may find it even stronger than dollar.

foreign-exchange rate

In finance, the exchange rates (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. For example an exchange rate of 102 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 102 is worth the same as USD 1. The foreign exchange market is one of the largest markets in the world. By some estimates, about 2 trillion USD worth of currency changes hands every day.

The spot exchange rate refers to the current exchange rate. The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.

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History of Chinese Currency

Exchange rate of the American dollar vs. China's Currency (Renminbi)