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Undervalued Currency

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Undervalued Currency
A currency with an exchange rate lower than it ought to be. A currency may be undervalued, for example, when its purchasing power, supply and demand are all strong, but its price is still comparatively low. Some governments keep their currencies undervalued deliberately because it makes their exports less expensive, but this is usually an unsustainable policy. See also: Weakening of a currency.


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Sustaining an undervalued currency will undermine China's own efforts to rebalance growth toward domestic consumption and higher-value-added production, " he added.
Summary: Because China has pegged its undervalued currency, the renminbi, to the dollar, every weakening of the dollar in the wake of America's financial crisis has also meant a weakening of the renminbi vis-A-vis other world currencies.
The United States has been calling for the yuan's appreciation as it claims the undervalued currency is one reason for its trade deficit with China.
 
 
 
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