How Much Will the Renminbi Strengthen?
Wells Fargo’s currency strategy team does not look for significant appreciation of the renminbi against the dollar. The team forecasts an exchange rate of 6.70 yuan/dollar in six months and 6.30 yuan/dollar in eighteen months. If this forecast is realized, then the renminbi would be about 2 percent stronger vis-à-vis the greenback in six months and 8 percent higher in eighteen months than it was at the end of last week. To put these forecasted moves in perspective, recall that Chinese authorities allowed the currency to appreciate only 0.5 percent against the dollar between July 2005 and the end of that year. By the end of 2006 (about 18 months after the initial revaluation), the yuan had appreciated 6 percent in total against the dollar. The most important priority for Chinese policymakers is social stability, and economic policies are rarely changed in a dramatic fashion. Rather, Chinese officials prefer to move in a very deliberate fashion to minimize the probability of negative sho
