Chinese Yuan highly undervalued While, there is a plethora of factors that govern the value of a currency, the overall economic health of a nation sets the long term perspective for the currency. However , other factors like government control may block the free movement of the currency and its trading value may not reflect its true value. Let’s take the example of India and China. India’s currency is not fully convertible and its value is determined by a managed float. Under a managed float, the central bank of a country intervenes in the Forex markets by buying and selling foreign exchange so as to avoid sharp fluctuations in the domestic currency’s value. However, a managed float usually reflects the true value of the currency sans sharp fluctuations. In effect, the central bank soft lands the domestic currency. The strong growth that India has experienced in the last decade is well reflected in the value of its currency, which has gone up from INR 49 to the US dollar ...
News is the world's premier 24/7 news feed covering everything .