What does a dollar rate hike mean

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By the global financial market attention of the big financial events, the forexcashbackcalculator Eastforexcashback cashbackforexbtc cashback forex East forex cashback undoubtedly one of them, then we often hear that the dollar this year to raise interest rates several times, so what exactly is the dollar interest rate hike? What does a dollar interest rate hike mean?  First, what is the dollar interest rate hike?  We know that the Federal Reserve is the central bank of the United States, but also the worlds central bank of the United States can take deposits of financial institutions need to open their own reserve accounts at the Federal Reserve, the Federal Reserve set deposit reserve ratio is simply understood that the Federal Reserve set a red line for banks, the money in the bank can not be less than the deposit, that is, if you absorb to 10 dollars of deposits, at least in the bank to stay two, the rest can be used for This value varies from country to country, but the basic difference is not much If one of the banks can not stay the money to the red line, we must find a way to make up for it as soon as possible, generally through short-term borrowing from banks with sufficient funds to replenish, this short-term borrowing rate is called the federal funds rate federal funds rate is the interbank lending rate, the dollar interest rate is added to this rate but this rate is not the Federal Reserve Order to the banks, but through the operation of the Federal Reserve, so that this interest rate passively to achieve the target If the interest rate is to be increased, the Federal Reserve will sell bonds to the banks to recover the dollar, the bank reserves do not meet the target, we must find a way to make up as soon as possible, but at the same time there are a number of banks are not enough money, that the interbank lending rate is high, while the market flow of dollars is also less, which is the dollar interest rate hike The consequence of this is to reduce the flow of dollars in the market, this is the meaning of the dollar interest rate hike Second, what does the dollar interest rate hike mean?  Usually the market will come out of expectations in advance, if the U.S. economic situation is not very optimistic, the dollar will fall after the announcement of the dollar rate hike, which is to buy expectations sell facts, for China, the impact of the dollar rate hike is not very big, because only the offshore yuan to participate in international foreign exchange transactions, the onshore yuan impact is very small, for China, only really can affect the international The first thing is, what is the meaning of the dollar interest rate hike? Does it mean to raise the interest rates of commercial banks for deposits and loans? No! Unlike the Peoples Bank of China, the dollar rate hike or rate cut refers not to the commercial bank deposit and lending rates, but to the federal funds rate, which is the rate at which commercial banks borrow funds from each other This rate has a substantial impact on commercial banks interest rates because the reserve balance can have an impact on bank deposits and loans So, although the federal funds rate is not a deposit and lending rate, it will affect deposit and lending rates The Feds rate hike will make the U.S. Therefore, international investors are more willing to hold dollars, and international hot money is pouring into the U.S. This is reflected in the foreign exchange market, as the dollar is strong and appreciates relative to other currencies, so other currencies depreciate relatively to the dollar (like supply and demand, the dollar can be understood as a commodity, the demand for dollars rises, the dollar naturally appreciates) after the dollar is strong, it is beneficial to domestic imports, the same The dollar can be exchanged for more foreign currencies, so foreign goods are also devalued relative to the dollar

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