UROP Proceedings 2022-23

School of Business and Management Department of Economics 170 Market Expectations and RMB Exchange Rate Policies Supervisor: LU, Yang / ECON Student: FERNANDO, Lindamulage Yasiru Hansaja / AE SUN, Luyu / MAEC WONG, Yiu Kwan / MAEC ZHU, Kezhen / MAEC Course: UROP1100, Summer UROP1100, Summer UROP1000, Summer UROP1100, Summer This paper studies how the market forecasters reacts different market indicators under China’s exchange rate regime policy. Thus, we analyse the reaction of individual and overall market forecasters to the central parity rate (CPR) surprise. We identified their under-reaction or over-reaction patterns. We identify that forecast revision correlates positively with CPR surprise in shorter time-frames, while correlates negatively in longer time-frames. We further compare the forecast trend with CPR trend and identified that CPR could be an important factor that affects market predictions of exchange rate.