Why does the yuan depreciate when the Fed raises interest rates?
After the Fed raised interest rates, the US central bank raised interest rates, which increased the borrowing cost of commercial banks to the central bank and made more funds flow into banks. After money enters the bank, the liquidity of money will become lower, and the number of dollars wandering in the market will decrease, which also leads to the appreciation of the dollar. In the foreign exchange market, the appreciation of the dollar will lead to the depreciation of other currencies, and the RMB will also depreciate.
In other words, after the Fed raises interest rates, the appreciation of the US dollar will lead to the depreciation of the RMB in the foreign exchange market. In turn, it will lead to an increase in the cost of imported goods and may even lead to an increase in the price of imported goods.
Why did the stock market fall when the Fed raised interest rates?
Mainly because the US dollar is the main international currency. When the Federal Reserve raises interest rates, the yield of US Treasury bonds is high, and funds from other countries will also want to invest in such a risk-free target. Therefore, the Fed's interest rate hike will attract international capital to the United States, which may exist in the form of stocks and bonds before it flows out. Once it is decided to flow out, it will sell stocks and bonds, leading to a decline in the stock market and bond market.
The above are some of the contents of the Fed's interest rate hike, which I hope will help everyone.