Advances in Economics, Management and Political Sciences

- The Open Access Proceedings Series for Conferences


Proceedings of the 2nd International Conference on Financial Technology and Business Analysis

Series Vol. 56 , 01 December 2023


Open Access | Article

The Impact of the Interest Rates Raised by Federal Reserve System on the Exchange Rate of the US Dollar Against the Chinese Yuan

Yuenan Chen * 1
1 Management school, University of Liverpool, Liverpool, L69 3BX, The United Kingdom

* Author to whom correspondence should be addressed.

Advances in Economics, Management and Political Sciences, Vol. 56, 34-41
Published 01 December 2023. © 01 December 2023 The Author(s). Published by EWA Publishing
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Citation Yuenan Chen. The Impact of the Interest Rates Raised by Federal Reserve System on the Exchange Rate of the US Dollar Against the Chinese Yuan. AEMPS (2023) Vol. 56: 34-41. DOI: 10.54254/2754-1169/56/20231054.

Abstract

On March 16, 2022, the U.S. raised interest rates for the first time in response to inflationary pressures, which announced a 25-basis point increase. After the latter four rate hikes happened in May, July, September and November, the cumulative increased total is 425 basis points. This change had a huge impact, especially on the exchange rate between the US dollar and the Chinese currency. This paper uses data on the exchange rate of the US dollar to the Chinese yuan after 2010, and ARIMA model is built to model and analyze the data in order to study the impact of the Federal Reserve’s interest rate hike on the exchange rate of dollar and yuan. Therefore, the analysis discovered that the Fed’s interest rate increase caused the appreciation of the USD and the depreciation of the CNY. Furthermore, the model helps to predict the trend of the future exchange rate, which in turn will provide suggestions for China’s future development.

Keywords

interest rate, exchange rate, US, China, ARIMA model

References

1. Mahmoudi, M. (2023). COVID lessons: was there any way to reduce the negative effect of COVID-19 on the United States economy? Journal of Economic Studies (Bradford), 50(5), 896–920. https://doi.org/10.1108/JES-01-2022-0052

2. ‘Understanding US inflation during the COVID era’ (2022) Premium Official News, 09 Sep, NA, available: https://link-gale-com.liverpool.idm.oclc.org/apps/doc/A717044760/GBIB?u=livuni&sid=bookmark-GBIB&xid=c4857d8d [accessed 23 Aug 2023].

3. ‘Fed raises interest rates by another 75 basis points’ (2022) Country Report: United States, 29 Jul, NA, available: https://link-gale-com.liverpool.idm.oclc.org/apps/doc/A712154405/GBIB?u=livuni&sid=bookmark-GBIB&xid=6df9ab4a [accessed 23 Aug 2023].

4. Siegel, R. (2021). Fed projects new interest rate hike in 2022, signals upcoming easing of supports if economy continues to heal. Washington Post, NA. https://link-gale-com.liverpool.idm.oclc.org/apps/doc/A676431460/AONE?u=livuni&sid=bookmark-AONE&xid=756927c3.

5. M. Zhang, (2022). The depreciation of the RMB against the US Dollar: Manifestations, Causes, Responses and prospects. Tsinghua Financisal Review.10:69-70.

6. T. T. Zhu, (2022). Volatility Analysis and Trend Forecast of RMB Exchange Rate against US Dollar. Zhongnan University of Economics and Law.

7. M. Zhang, Y. M. Chen, (2022). No need to worry about a sharp depreciation of the RMB against the US dollar. China’s currency market, 11:22-26.

8. H. Z. Qi, Y. Y. Chen and Y. Y. Liu, (2023). Spillover effect and Countermeasures of the Federal Reserve’s interest rate hike Cycle in 2022. Journal of Changchun Finance College, 01:5-14.

9. Z. P. Zhang, (2022). Study on the Impact of Exchange Rate Fluctuation on China’s Import and Export Trade. North China University of Technology.

10. N. S. Cooray, P. Thangavel, (2022). The impact and implication of the COVID-19 on the trade relationship between China and the United States: the political economy perspectives. Transnational Corporations Review 14.1.

Data Availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License. Authors who publish this series agree to the following terms:

1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this series.

2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this series.

3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See Open Access Instruction).

Volume Title
Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
ISBN (Print)
978-1-83558-159-9
ISBN (Online)
978-1-83558-160-5
Published Date
01 December 2023
Series
Advances in Economics, Management and Political Sciences
ISSN (Print)
2754-1169
ISSN (Online)
2754-1177
DOI
10.54254/2754-1169/56/20231054
Copyright
01 December 2023
Open Access
This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited

Copyright © 2023 EWA Publishing. Unless Otherwise Stated