USD/CNY Exchange Rate Correlation: What Dynamic Mechanism During Unexpected Shocks?

This study analyzes the exchange rate correlation between the US dollar (USD) and the Chinese yuan (CNY) during different economic and financial crises between 2005 and 2025. By using daily data on the USD/CNY rate, we apply dynamic correlation models (Rolling Correlation and DCC-GARCH) to assess how the relationship between these two currencies evolved during periods of stress such as the 2008 global financial crisis, the 2015-yuan devaluation, the Sino-US trade tensions and the COVID-19 crisis. The results show that the correlation between the USD and the CNY varies significantly depending on the nature and origin of the crisis: it tends to intensify during global crises, while it becomes more unstable during crises specific to China or the United States. These dynamics underlie the strategic role of the yuan in the international monetary system and the impact of the intervention policies of the Chinese central bank. The study thus offers important implications for investors, decision-makers and academic research.