FED has since been pushing up interest rate in the U.S. to contain inflation while
PBoC has since been cutting interest rate to pump prime the sluggish economy. What would
be the implication for the Chinese Yuan (CNY) if there is no capital control in China?
A) CNY will depreciate as portfolio investment flows will lead to an increase in the demand
and supply of foreign exchange.
B) CNY will depreciate as portfolio investment flows will lead to a decrease in the demand of
foreign exchange and an increase in the supply of foreign exchange.
C) CNY will depreciate as portfolio investment flows will lead to an increase in the demand of
foreign exchange and a decrease in the supply of foreign exchange.
D) CNY will appreciate as portfolio investment flows will lead to a decrease in the demand
and an increase in the supply of foreign exchange.
E) CNY will appreciate as portfolio investment flows will lead to an increase in the demand of
foreign exchange and a decrease in the supply of foreign exchange.