|The People's Bank of China has now allowed market forces to have a greater role in determining the value of the renminbi. Supply and demand can affect the value of a currency. Here there is an extension in supply of the RMB which causes the exchange rate to fall to R2 from R1. This results in a depreciation of the RMB.|
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Photo source: www.cmsfx.com
The renminbi (RMB) is the name of the currency used in China while the yuan is one unit of it.