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Lesson_69_The Mechanics of Fixed Exchange Rates

Lesson_69_The Mechanics of Fixed Exchange Rates - The...

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1 Lesson 69 1 The Mechanics of Fixed Exchange Rates Some countries choose to fix the value of their currency relative to some other currency or currencies This lesson describes the mechanics involved and explains how intervention in the FX market has implications for a country’s money supply Lesson 69 2 Until the summer of 2005, Chinese government pegged the value of their currency (the yuan, also known as renminbi) to the U.S. dollar Chinese government let yuan appreciate sharply in summer 2005, followed by a more managed appreciation of the currency Lesson 69 3
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