This paper systematically analyzes the transmission mechanism and impact effect of the Federal Reserve's interest rate policy on the RMB exchange rate during Trump's administration (2017-2021 and 2025 to present). The research shows that during the Fed's interest rate hike cycle, the widening of the US-China interest rate differential triggers capital outflows, intensifying the RMB's phased depreciation pressure. The superimposition of trade protectionist policies (such as imposing tariffs on China) further amplifies exchange rate fluctuations. During the 2018 Sino-US trade war, the RMB depreciated by 12.3%. After entering the interest rate cut cycle, the weakening of the US dollar eases the RMB's depreciation pressure, but policy expectation differences may lead to two-way exchange rate fluctuations. The empirical analysis (VAR model) shows that the contribution of the US policy mix to RMB exchange rate fluctuations is as high as 32%, significantly higher than that of a single policy shock. The People's Bank of China effectively stabilizes the exchange rate through guiding the central parity rate, intervening in the offshore market (such as issuing central bank bills), and maintaining internal and external balance of monetary policy (such as cutting the reserve requirement ratio). In the second quarter of 2025, fundamental factors offset 54% of external shocks. Overall judgment, the future trend of the RMB exchange rate depends on the pace of the Fed's interest rate cuts, the evolution of Sino-US economic and trade relations, and the prevention and control of extreme risk events.
Qianhan Long (Tue,) studied this question.