Bank for International Settlements. Include assessment of extent of Essay

Bank for International Settlements. Include assessment of extent of overvaluation or undervaluation of the Chinese yuan over recent years compared to the situations ofthe US dollar, Euro, and Japanese yen - Essay Example Using the relative PPP, a 2006 studt (Sinnakkannu & Nassir) shows that it was actually overvalued from January to October 2005 and was undervalued in the next months after. Meanwhile, the RMB was overvalued compared to the Japanese Yuan from January 2005 to March 2006 but its value started dropping soon afterward. Lastly, when compared with the Euro, the RMB was overvalued the entire 2005, then was undervalued in 2006 onwards. Using the reference exchange rate, we can see that, the value of the RMB vs. the Japanese has increased by about 47.65% from its 2006 while it has decreased by 2% from its original value in 2005. One will remember that the RMB was still pegged to the USB in 2005, hence, one may say that the Chinese Yuan was still undervalued at the time, as proven by the balance of payments approach presented in the previous sections. Meanwhile, it is not appropriate to compare the Yuan with the Yen using the international trade parity since published data are typically in U.S. Dollars. National Bureau of Statistics of China, 2010. Reference Exchange Rate of Renminbi (Period Average). China Statistical Yearbook 2010. Available at: http://www.stats.gov.cn/tjsj/ndsj/2010/html/R0602E.HTM [Accessed November 18, 2011]. Sinnakkannu, J. & Nassir, A.M., 2006. A Study on the Effect of De-Pegging of the Renminbi Against the US Dollar on the China’s International Trade Competitiveness. International Research Journal of Finance and Econnomics, (5),