How does the Singapore dollar compare with the Yuan in terms of it real value?
Is the Yuan undervalued? What are the differences between the valuation techniques of these two currencies?
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M$3 Answers
In terms of which one has more "real value" (as opposed to relative exchange rate per US dollars or British Pounds), that's a bit of a tricky question to answer for a couple of reasons, to the extent that it's almost like comparing apples to oranges.
1) The Singapore dollar, although allowed to float, is only allowed to vary within the limits of a secret mean that is determined by the value of a secret "basket of currencies" known only to the Monetary Authority of Singapore.
That gives what the Singapore government feels to be the best balance between having a currency that adjusts to market exchange rates combined with having an ability for the government to control the exchange rate.
2) The Renminbi exchange rate is hard-set by the People's Party, and they're very secretive about what metrics they use to determine that exchange rate, but most analysts think it's undervalued. It's not easy to say how accurate their assement is, but most of those analysts have good scholarly credentials.
Given that, although the official rate of CNY (Renminbi) to USD is 6.8 per U.S. dollar, the scholars think it should be around 3.5 per U.S. dollar, or about half the value of what it would be if allowed to float.
Therefore, in terms of which has more "real value", the answer is:
1) The Singapore dollar is as valuable as the world says that a basket of currencies (known only to the Monetary Authority of Singapore) says those currencies are, so nobody really knows what a Singapore dollar would be calculated to be if everyone knew what the MAS is anchoring it on, but odds are their guestimates are not far off, because whatever those other currencies are, they're probably currencies that Singapore trades with a lot, and those currencies have values that are fairly well calculated according to those nations' relative currency supplies and GDPs, so the "real value" of a Singapore dollar is probably close to what the market says it's value is.
2) Because the Renminbi is fixed by the People's Party, one has to accept the value as set, therefore, insolong as the PRC is in charge, that's effectivly it's "real" value, *but* if for some reason the PRC were to ever allow the Renminbi to float, it would probably shoot up in value, in which case anyone invested in Renminbi would suddenly see big gains, which means...
*Embedded* in the Renminbi is more "real value" than the Singapore dollar... if only it could ever be allowed to show it, and if it ever did get to express that value by floating, it's "real value" would *become* about the same as the Singapore dollar.
I know that's a fuzzy answer, but you chose to compare two especially-controlled currencies, each controlled in a very different way, so it's like comparing an enigma to a mystery.
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M$The Hong Kong dollar is stable and The Yuan is similiar in that both of them it are the most stable currency for the last twenty years. Singapore dollar also has a lose peg and it has been shaken by wild financial crisis more than once.
Hong Kong also faced financial crisis and not just the recent one.It faced the so
call Asian financial crisis in 1997. All the currencies from the Asian dragons collapse: Singapore,Taiwan and Korea but not the Fourth Dragon Hong Kong.
The Yaun is undervalued relative to currencies like the dollar or euro.
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M$
If the Singapore dollar is undervalued the price stability will be possible, short term. However, once the Singapore dollar corrects to the real value, exports will decline sharply.
How does the Singapore dollar and Yuan real value of the dollar compare?
Are you suggesting the Chinese Yuan is stronger and gaining strength?