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Multi natioinal financial management. The determinants of exchange rates. On July 6, the trade war with...

Multi natioinal financial management.

The determinants of exchange rates.

On July 6, the trade war with China has begun. How do you think that the trade way will have an impact on the exchange rate of Chinese RMB? You need to cite at least one article to support your arguement.

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Answer #1

With the beginning of the trade war with China, there would be a decline in the value of the Chinese RMB. This is due to the rising tariffs on Chinese imports. The tariffs on imports will reduce the demand for the Chinese goods and hence the demand for the Chinese currency. Due to the forces of demand and supply, a lower demand for chinese currency will bring down the exchange rate of RMB.

Source:   

Cnbc. (n.d.). RPT-UPDATE 4-Chinese stocks, yuan down, U.S. Trade tariffs kick in

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