The Guiding Effect of RMB Exchange Rate Expectations on Short-Term Cross-Border Capital Flows during the Federal Reserve Interest Rate Hike Cycle and Policy Responses
DOI:
https://doi.org/10.54097/ghwcz845Keywords:
Federal Reserve interest rate hike, RMB exchange rate expectations, short-term cross-border capital flows, macroprudential regulation, supply-chain financeAbstract
During the Federal Reserve interest rate hike cycle, higher returns on U.S. dollar assets, tighter global liquidity and shifts in risk appetite jointly reshape cross-border portfolio allocation. RMB exchange rate expectations therefore become a key guiding variable for short-term cross-border capital flows. This paper examines the transmission chain of “external tightening shock - exchange rate expectation adjustment - short-term capital flow response” from four mechanisms: interest-rate differential repricing, exchange-rate risk premium, asset price revaluation and corporate foreign exchange settlement behavior. Based on the two-way fluctuation of the RMB exchange rate and changes in China’s cross-border payment structure since 2022, the paper finds that depreciation expectations have a stronger triggering effect on short-term capital outflows and can resonate with offshore market sentiment, securities investment volatility and corporate hedging behavior. Appreciation expectations, by contrast, tend to restore settlement willingness and RMB asset allocation more gradually. Policy responses should focus on expectation monitoring, macroprudential adjustment, risk-neutral exchange-rate management and regional supply-chain finance services, so as to improve the forward-looking and refined governance of cross-border capital flows under external shocks.
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