Macroeconomics Assignment 2022

Running Head: Macroeconomics 1
Macroeconomics
Name of the Student
Mail address
Course Title and Number
Graded Project Number
Name of the University
Author Note

Running Head: Macroeconomics 2
Table of Contents
Introduction......................................................................................................................................3
Analyze the Chinese currency compared to the US currency.........................................................3
Macroeconomic analysis related to the foreign exchange and investment......................................5
Conclusion.......................................................................................................................................6
References........................................................................................................................................7

Running Head: Macroeconomics 3
Introduction
In terms of macroeconomics, exchange rate shows the conversion rate of exchanging one currency for the other
currency of other country. As per the statement of Özer (2019), the exchange rate of the foreign currency
between the countries is determined by the experts of the foreign exchange market. During the participation in
the international trade, both the buyers and the sellers need to have in depth knowledge about the foreign
exchange rate. The investors mentioned the valuation of the US Dollar has been gaining confidence compared
to the other countries. On the other hand, some of the emerging economies and the oil exporting economies
such as Russia, China and Brazil are also strengthening their currency valuation. This paper would shed the
light to find out the currency exchange valuation of Yuan respect to the US Dollar.
Analyze the Chinese currency compared to the US currency
It is noted that for measuring the valuation of the countries, the US Dollar is considered as the standard value
since it is the widely used for most of the global trade transactions among the nations. As opined by Liu & Woo
(2018), since the year 1944, the US Dollar has been considered as the reserve currency of the world. This
decision was taken in the Bretton Woods Agreement. In this section, the currency valuation and the exchange
rate of the Chinese currency against the US Dollar would be going to be discussed. In this regard, the exchange
rate of China in the next five years would be analyzed.
The national currency of China is known as Yuan or Renminbi, and the exchange rate of the currency of the
nation is fixed. This refers that the value of the Yuan exchange rate is pegged and accepted by the monetary
authority of the other countries. In addition, the Yuan currency of China is able to keep the economy
competitive and hence, it has been playing an essential role in the economy of the nation. Since, China is one of
the largest trading partners of the US; therefore, China is concerned about the controlling of the price level of
the exportable. More specifically, the Chinese exporters target to set and charge the price of the exportable in
such a way, so that the price level would be lower compared to the manufacturers and the suppliers of the US.
In this context, it can be said that the Communist Party of China has strong involvement in controlling the
Central Bank of the country before taking any decisions for the economy. He et al., (2019) mentioned that the
funds by FXI is identified as the largest holdings of three organizations of China and these are Commercial
Bank of China, China Construction Bank Corp and Tencent Holdings. These major shares by FXI prove that
some of the large investors hold their certain percentage of funds into the Chinese businesses as well as in the
Chinese organizational operations, even after trade war and the currency devaluation of China.