Undervalued Currency

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.
References in periodicals archive ?
8 per cent inflation rate, undervalued currency, stable banking system) combined with the launch of the Apple iPhone 6, increased demands for semiconductors/electronic components in Silicon Valley and the strongest earnings growth momentum available in the Pacific Basin outside Japan.
For many years the United States has viewed its emerging challenger China with particular suspicion in respect of its seemingly manipulated and undervalued currency, provoking American trade deficits and flooding the global market with cheap goods.
Thus, German exports are being indirectly subsidized and stimulated and German imports inhibited by an artificially and systematically undervalued currency.
Lardy pointed out that 'the surpassing of the US is not because of a substantially undervalued currency that has led to an export boom,' pointing out that Chinese imports have grown at a faster rate than exports since 2007.
The peso, meanwhile, "is the most undervalued currency in the region.
China's economic growth at these levels depends on three equally important factors: exports to the US, Europe and Japan; access to energy resources; and an undervalued currency that helps competitiveness.
First is the possibility that capital controls may have the effect of vitiating or preventing external adjustment, for example when inflow controls are used to sustain an undervalued currency.
Scores of senior officials are scheduled to meet in Beijing this week to discuss an important agenda, including China's artificially undervalued currency, disputes over intellectual property and how much Beijing will do to help rein in Iran's nuclear ambitions and halt North Korea's nuclear weapons program.
In doing so, he has selected a few specific trade issues as case studies in the book, including: China-US negotiations regarding China's PNTR (Permanent Normal Trade Relations) status with the United States; China's entry into the WTO and its obligations concerning China-US trade; the China-US textile trade disputes; US export control policy toward China; and the strong debate over China's undervalued currency (RMB).
But its undervalued currency and hidden export subsidies have been systematically undermining manufacturing in other BRICS countries, especially India and Brazil.
The demand for those goods overseas, coupled with an undervalued currency, ensured that China built up a huge surplus of savings.
Most would agree that an undervalued currency should lead to currency appreciation.