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Originally posted by Blackout
I just want some clarification on this here. As we all know, the value of the dollar has been plummeting due to the deficit. Now, let's say I exchange my US dollars for Euros or Yuans. I'm under the impression that I will lose money if I exchange for Euros and gain money if I go for Yuans.
If the above is true, how much do I gain by taking the Yuan route and how much do I lose if I go the Euro route?
Bah, I wish I could just move to Europe, but it doesn't look like that's happening soon.
[edit on 6-12-2004 by Blackout]
Originally posted by lmgnyc
The Yuan is currently pegged to the US Dollar (around 8.3 Yuan per dollar), so there is virtually no fluctuation in exchange rates and no loss/gain for exchanging currency. The U.S. is trying to push the Chinese to allow their currency to float freely because it is artificially undervaluing the Yuan--some believe by almost 40%. It is also artificially propping up the dollar--by un-pegging the Yuan, the dollar would fall to it's natural level because the Chinese would dump their massive reserves of US dollars (as would the other Asian countries that are holding dollars to keep the value of their currency high.) The U.S. government has stepped up it's pressure on the Chinese, but there is no telling when the Chinese will change to a market-based valuation. It will happen eventually (and sooner, rather than later), so holders of the Yuan will get a big payday when it does.
Compared to the Euro, the US dollar value has been declining because of inflation. Basically, this means that Europeans will flock to the U.S. because it will be cheap to travel here and buy our stuff, but for Americans, it means that anything that comes from Europe will be more expensive--including travel overseas. Currently, one Euro costs $1.34--at the beginning of the summer, a Euro cost $1.20. This is also true for the British Pound, which is about $1.94 dollars--a 12-year high.