Lately, the yuan has come under the spotlight. On one hand, the Chinese currency achieved excellent results as the IMF added it into the Special Drawing Rights Basket. On the other hand, the yuan exchange rate slumped to the lowest levels since 2008, and the US President-elect pledged to proclaim the Chinese government a currency manipulator.
Indeed, the situation is complicated. Having obtained the status of the reserve currency, the renminbi was supposed to attract attention of investors and central banks. Some experts say that the yuan will depend directly on the pace of economic growth in the country in the longer term. If the authorities continue to cut excess capacity and step up the fiscal stimulus, the Chinese currency will strengthen. In this case the renminbi as well as currencies of other developing countries have a good chance to resist the greenback fiercely. Besides, the US and China influence the Asia-Pacific Region in different ways. According to surveys of several central banks, these countries usually have the same impact on financial markets. However, the US economic situation produces a greater effect on the markets during a crisis.
The greenback gains hefty profits amid the global recession, but the renminbi will definitely consolidate as soon as the global economy recovers.
