International Journal of Social Science & Economic Research
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Yecheng Yao

Volume - 2 Issue - 6, Pages - 3615-3629

As China play an increasingly important role in global trading, its economy raises serious attention all over the world. Accordingly, China's official currency, the yuan, an essential indicator of its economy health, has become one of the most valued currencies in the world. Therefore, it is useful to forecast the future value of the yuan. For this purpose, this paper proposes a model that can accurately forecast the exchange rate between the yuan and the dollar. As is known, the yuan-to-dollar exchange rate was as low as 6.08 in 2014. However, this spiked sharply to reach 6.9 in only two years. By analyzing related factors such as the consumer price index (CPI), market expectations, and interest rates, this paper proposes a model that predicts the yuan-to-dollar exchange rate to increase even more in the future, despite the consistent and dramatic escalation of the rate in the last two years. This result is reasonable in that the U.S. economy has mostly recovered from the 2008 market crash and stayed strong and robust, whereas the Chinese government has preferred the devaluation of the yuan to make its exports more competitive in the global market. The model suggests that investors should purchase more U.S. dollars (relative to the yuan).

Cite this Article:

[Yao, Yecheng. "FORECASTING THE YUAN-TO-DOLLAR EXCHANGE RATE." International Journal of Social Science & Economic Research 2.6 (2017): 3615-629.]

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