Abstract
On March 16, 2022, the U.S. raised interest rates for the first time in response to inflationary pressures, which announced a 25-basis point increase. After the latter four rate hikes happened in May, July, September and November, the cumulative increased total is 425 basis points. This change had a huge impact, especially on the exchange rate between the US dollar and the Chinese currency. This paper uses data on the exchange rate of the US dollar to the Chinese yuan after 2010, and ARIMA model is built to model and analyze the data in order to study the impact of the Federal Reserves interest rate hike on the exchange rate of dollar and yuan. Therefore, the analysis discovered that the Feds interest rate increase caused the appreciation of the USD and the depreciation of the CNY. Furthermore, the model helps to predict the trend of the future exchange rate, which in turn will provide suggestions for Chinas future development.
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