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The 6.90 level is officially behind us as indicated by the
recent USDCNY central parity fixings. USD dominance has been pervasive
and USDCNH was last seen around 6.94; USDCNY at 6.92. Now that the China
REER has fallen 7.4% from its peak last Nov, we seek to estimate the
degree of misalignment in the CNY base on its fundamental drivers. Using
the Behavioral Equilibrium Exchange Rate (BEER) approach of MacDonald
(2004), the current China REER is estimated to be as much as 35%...
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