Therefore, although the federal funds rate is not the deposit and loan interest rate, it will affect the deposit and loan interest rate. The Fed's interest rate hike will increase the deposit interest of American depositors. Therefore, international investors are more willing to hold dollars, and international hot money has poured into the United States.
This is reflected in the foreign exchange market, which shows that the US dollar has strengthened and appreciated relative to other currencies, so other currencies have depreciated relative to the US dollar. Just like the relationship between supply and demand, the dollar can be understood as a commodity. As the demand for dollars rises, the dollar naturally appreciates. ) After the US dollar strengthens, it is conducive to domestic imports. The same US dollar can be exchanged for more foreign currencies, so foreign goods are also devalued relative to the US dollar.
The Impact of Fed's Interest Rate Raising on RMB
In the short term, the Fed's interest rate hike will cause the dollar to rise, and the RMB will fall against the dollar in the short term. However, the People's Bank of China believes that the US dollar will rise and the RMB will remain stable for the following reasons:
1, China's economic growth rate is relatively slow, but it is still at a high level from the global horizontal comparison;
2. China still maintains a certain trade surplus;
3. After the RMB is included in the "Special Drawing Rights" currency basket of the International Monetary Fund, the scale of RMB assets held abroad will gradually increase;
4. China has abundant foreign exchange reserves, sound financial position and sound financial system.
Fed's interest rate hike is conducive to the rise of the US dollar exchange rate. Usually, the market will exceed expectations in advance. If the economic situation in the United States is not very optimistic, the dollar will fall after the interest rate hike is announced. This is the fact that buying is expected to sell. For China, the impact of the Fed's interest rate hike is not great, because only offshore RMB participates in international foreign exchange transactions, and the impact of onshore RMB is very small. For China, only events that can really affect international competitiveness will really affect China, such as the tax reform in the United States. Its purpose is to reform enterprises.
Tips: The above information is for reference only.
Reply time: 2021-11-02. Please refer to the latest business changes announced by Ping An Bank in official website.