Interest rates have an indirect effect on exchange rates. |
When interest rates rise, the rate gap with the U.S. will narrow and that will provide pressure for the yuan to strengthen. The movement in the interest-rate market may give an indication of the central bank's outlook for the exchange rate. To the Chinese government, yuan appreciation has become acceptable. |
When interest rates rise, the rate gap with the US will narrow and that will provide pressure for the yuan to strengthen. |