Desert Inc Forecast the Exchanges Rates Between the Renminbi and the Euro

Desert Inc.is a Spanish producer of barrels and is considering the establishment of a subsidiary in China.The projected time horizon for the project is 2 years.Management wants to set up the production facilities,get them running and then sell the facilities after 2 years.The current exchange rate is renminbi 11/euro.The renminbi is pegged to the US dollar at an exchange rate of renminbi 8.28/$ and the peg is expected to stay unchanged over the next two years.The expected inflation rates for the next two years are given below:
$\begin{array}{lll}&\text { Year } 1&\text { Year } 2\\\text { Expected Inflation in US: } & 2 \% & 3 \% \\\text { Expected Inflation in China: } & 10 \% & 12 \% \\\text { Expected Inflation in Spain: } & 2 \% & 3 \%\end{array}$ Forecast the exchanges rates between the renminbi and the euro for the next two years.Justify your forecast.