China's currency conundrum

Western demands for renminbi appreciation are misguided, but the People's Bank remains caught in a trap between hot money inflows and its own hefty savings and low interest rates.

It seems the People’s Bank of China cannot win. In late February, the gradual appreciation of the renminbi was interrupted by a 1 per cent depreciation (to $1:¥6.12). Though insignificant in overall trade terms, especially when compared with the volatility of floating exchange-rate regimes, the renminbi’s unexpected weakening sparked a global furor.

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