Analysis of Influencing Factors of RMB Exchange Rate Trend Based on Least Square Method

Abstract

The exchange rate is the currency ratio between countries, which determines what standard is equitable for the distribution of the benefits of economic transactions between countries. There are many factors affecting the change of RMB exchange rate, such as inflation rate differential, commodity price, economic growth rate differential, foreign exchange reserve and international balance of payments. In this paper, the least square method is used to analyze the exchange rate's influencing factors. The results show that the balance of payments, commodity prices and the dollar against the RMB exchange rate has a negative correlation. Inflation, gross domestic product, foreign exchange reserves and the dollar against the RMB Exchange rate has a positive correlation.