Analysis on the Pegging of Chinese Yuan with US Dollar (CD)

Abstract

The Chinese foreign continuously increasing exchange rate vis-a-vis same.exchange reserves have been by every coming year whereas its United States dollar remained the The reason being that the Chinese government kept on buying the United States financial assets especially the treasury bills which resulted in the increasing demand for the US dollar and the injection of cheap cash/liquidity into the US economy. This action on the part of Chinese government strengthened the purchasing power of the local US inhabitants who in return kept on buying the Chinese goods and services. A peg to the dollar minimizes lenders and direct investors inflows that are so essential in capital poor countries. currency risks for foreign and it facilitates capital for the economic development China has pegged Yuan with dollar and it increasing its exports to America. This alarming for the USA economy and the USA China to freely float their currency.is continuously has now become economists want