Conservatively speaking, then, it appears that over the past couple of years, the real exchange rate of the yuan, deflated by unit labor costs, has been appreciating against the dollar at a rate of something like 15 percent per year.
In other words, these measures have had almost no mid-term impact on the dollar-real exchange rate because investments of all kinds continue flowing into this country.
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Mr Svensson argues that the yen needs to be pushed to an undervalued level, from which the public would then expect an appreciation of the real exchange rate.
And if a devaluation cannot be used to reduce real wages, the real exchange rate overvaluation will be undone via a slow and painful process of wage and price deflation.
China's big surpluses and America's big deficits depend on the real exchange rate between them and all of their trading partners.
Its real exchange rate (which takes account of differences in inflation between Japan and its trading partners) fell to a 23-year low last month (see chart).
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Foreign investors report presentations by the Central Bank mentioning a real (ie, inflation-adjusted) exchange rate that implies annual inflation of around 20%.
Some economists argue that as China gets richer it needs to allow its real exchange rate to rise, in order to reap the full gains of its economic success.
And already, because of inflation in Brazil and price deflation in Argentina, the real exchange rate between them is close to its pre-devaluation level.
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It seems the Ministry of Finance has ceded foreign exchange rate policy back to the Central Bank where it belongs. the bank has, for now, won the policy argument that further weakening of the real will be inflationary and lead to a stronger real exchange rate, says Tony Volpon, managing director at Nomura Securities in New York.
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Mr Velloso is worried about possible further weakness in the exchange rate (the real depreciated by 17% against the dollar in the last three months of 2008), and also by the ability of Brazilian companies to roll over their debt.
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