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To: Zakeet
The RMB has had a conversion rate in the range of about 8.25:1 for over 15 years. However, this rate was pegged 1:1 against the dollar for pretty much the entire time.

I don't follow... If the rate is about 8.25:1 then how is it pegged at 1:1?

11 posted on 07/11/2011 9:34:04 AM PDT by FromTheSidelines
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To: FromTheSidelines
I don't follow... If the rate is about 8.25:1 then how is it pegged at 1:1?

The conversion rate from RMB into USD was about 8.25:1 and pegged to the U.S. dollar on a 1:1 basis.

To illustrate, assume the USD was converted into Euros at, say, 1 USD = 1 EUR. In this case 1 EUR could be exchanged for 8.25 Yuan. Now assume that the dollar loses one half of its purchasing power against the Euro. In the case, the collar would be converted at 2 USD = 1 EUR. Similarly, because it is pegged with the dollar, the RMB would be lose half of its purchasing power against the Euro and be exchanged at the rate of 16.5 Yuan = 1 EUR.

12 posted on 07/11/2011 9:59:20 AM PDT by Zakeet (The Wee Wee's real birth certificate got shredded with his Rezko mortgage records)
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