Hedging Against U.S. Chinese Currency Fluctuation

Abstract

Hedging currency helps protect financial assets and stock price by reducing the potential volatility of foreign exchange rates. A multiple regression analysis is used to assist in explaining some of the relative valuation of U.S. Chinese currency. This analysis uses the U.S. interest rate, U.S. 10-year Treasury Bond, Chinese CPI, U.S. CPI, Chinese Government 10-year Bond, and the Chinese Import Price as independent variables to predict the U.S. Chinese exchange rate. After conducting the analysis, the model was determined to be statistically significant. Two predictor variables: the U.S. CPI and Import Price Index were also statistically significant.