The RMB has creept up quite a bit in the last few days. I think this is part of a great deal between the United States and China. China appreciates the RMB in exchange for US support for a greater role in international finance institutions like the World Bank and the IMF. When I read about Hank Paulson talking about this about a month or two ago, my jaw dropped, because it was something that *might actually work*.
I’m working on Shanghai warrants because I have the data, but if I had access to Bloomberg, I’d be working on models of RMB futures. One thing that I strongly suspect is that the People’s Bank of China is intentionally adding in some volatility into the peg in order to confuse speculators. It would be interesting if the PBC is taking data from non-deliverable options and then using that information to set the exchange rate in a way that maximizes confusion among currency traders.