tag:blogger.com,1999:blog-13378665.post112199595433402073..comments2024-03-01T16:32:41.076+08:00Comments on Sun Bin: How does the new RMB peg work?Sun Binhttp://www.blogger.com/profile/08093210384069958083noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-13378665.post-1122339233617077742005-07-26T10:53:00.000+10:002005-07-26T10:53:00.000+10:00Stephen L Jen of Morgan Stanley said,"The basket i...<A HREF="http://www.morganstanley.com/GEFdata/digests/20050722-fri.html#anchor1" REL="nofollow"><BR/>Stephen L Jen of Morgan Stanley said,<BR/></A><BR/>"The basket is much more important than the revaluation. By adopting a basket reference framework, the determinants of USD/RMB are no longer the Chinese economic fundamentals, but other currencies in the basket. Because this is a basket reference rate, USD/RMB can go either higher or lower, depending on the underlying anchor currencies. (If EUR/USD sells off, it is possible USD/RMB trades higher than the original parity of 8.28!) The basket is likely to be heavily dominated by the USD. Using China’s trade weights, normalized, a five currency basket would have the following weights: USD (27%), JPY (31%), HKD (24%), EUR (15%), and GBP (4%). The hard dollar pegs (USD and HKD) account for close to 50% of the basket. If you consider the JPY as a soft USD peg, the weight on the dollar could be as high as 80%. This means USD/RMB will still be very ‘docile’, with the index being ‘sticky’ relative to the USD."<BR/><BR/>-- that agrees with my interpretation of the basket peg.Sun Binhttps://www.blogger.com/profile/08093210384069958083noreply@blogger.comtag:blogger.com,1999:blog-13378665.post-1122098459859134232005-07-23T16:00:00.000+10:002005-07-23T16:00:00.000+10:00Some people said it will be a 'crawl' of max 0.3% ...Some people said it will be a 'crawl' of max 0.3% (in fact 0.15%) per day, if the basket recalculations requires a change larger that that number. It makes no sense. The central parity will then be predictable and it will attract more speculators. PBC will lose tons of RMB. <BR/><BR/>The central parity should only be dictated by market force during the past 24 hours. i.e. the relative shift within the basket.Sun Binhttps://www.blogger.com/profile/08093210384069958083noreply@blogger.comtag:blogger.com,1999:blog-13378665.post-1122020908298834562005-07-22T18:28:00.000+10:002005-07-22T18:28:00.000+10:00http://intl.econ.cuhk.edu.hk/exchange_rate_regime/...http://intl.econ.cuhk.edu.hk/exchange_rate_regime/index.php?cid=3<BR/><BR/>compare to Singapore's board. the difference is actually quite small. <BR/><BR/>both have a black box of undisclosed basket.<BR/><BR/>RMB has a narrow band of 0.3%, SGD has an undisclosed band<BR/><BR/>SQD is freely floated, central bank may intervene is it is out of bound. RMB rate is announced daily.Sun Binhttps://www.blogger.com/profile/08093210384069958083noreply@blogger.com