Chapter 9 Factors that Influence Exchange Rates 295
has been a large outflow of RMB from China for
several reasons. One is that the People’s Bank of
China has been trying to support the RMB by us–
ing its foreign-exchange reserves. In January 2016
alone, it used $100 billion in reserves to defend the
RMB, pushing its reserves to about $3.23 trillion.34
Although that is still a large amount of reserves,
it is clear that the outflow of money from China
by private investors as well as the government is
draining the reserves. Will the government have to
continue to support the RMB and further drain its
foreign currency reserves?
The euro is a strong currency and represents the
second-largest amount of allocated reserves behind
the dollar. The major challenge of the euro is that
its member countries are fragmented with numer–
ous internal problems, such as Greek debt. In ad–
dition, Britain, one of the strongest countries in the
EU, never adopted the Euro, and in 2016 it voted to
leave the EU. ■
CASE Welcome to the World of Sony—
Unless the Falling Yen Rises
(or Falls) Again35
For five consecutive years, the yen was falling against the U.S.
dollar, which actually was a good deal. The reason is because
stronger revenues and earnings from abroad were translated
into more yen. In addition, the weaker yen helped Sony in
export markets. However, in early 2016, the yen began to
strengthen against the dollar from ¥123 in November 2015
to ¥120 at the end of 2015, to ¥112.4 on March 31, 2016,
the close of Sony’s fiscal year. Whereas Toyota disclosed in
Japanese foreign-exchange policies favored companies and
industries that the government wanted to succeed, especially
in export markets. With a cheap yen, it was easy for compa–
nies to expand exports rapidly.
The First Endaka
