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Assessing the Global Currency Market’s Response to the Federal Reserve’s Interest Rate Cuts: A Comparative Analysis of RMB and JPY Exchange Rate Volatility

In: Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)

Author

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  • Yuhui Lin

    (Hong Kong Metropolitan University, Lee Shau Kee School of Business and Administration)

Abstract

This paper examines the impact of the US Federal Reserve’s interest rate cuts on global exchange rates, with a particular focus on the impact on major currencies such as the renminbi and the yen. The analysis includes a comprehensive examination of how interest rate cuts affect exchange rate volatility and assesses the potential impact on international trade and cross-border investment. The study draws conclusions through literature review, hypothesis testing and data analysis. The results of the study indicate that although there was some volatility in the exchange rates of the currencies after the Federal Reserve’s interest rate cuts, regression analyses and t-tests showed that there was no significant difference in the exchange rate changes before and after the adjustments. The study also pointed out the shortcomings in methodology and data selection, suggesting that future research could explore the different channels through which the Fed adjusts its interest rate policy and its impact on the business cycle.

Suggested Citation

  • Yuhui Lin, 2025. "Assessing the Global Currency Market’s Response to the Federal Reserve’s Interest Rate Cuts: A Comparative Analysis of RMB and JPY Exchange Rate Volatility," Advances in Economics, Business and Management Research, in: Maizaitulaidawati Md Husin (ed.), Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025), pages 417-424, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-748-9_46
    DOI: 10.2991/978-94-6463-748-9_46
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