After the Federal Reserve decided to cut interest rates by 50 basis points in September last week, USDT/RMB once fell below the integer mark of 7. However, on Monday (September 23) in the Asian market, USDT/RMB rebounded and broke through 7.05. The People's Bank of China (PBOC) lowered the short-term policy interest rate, ending the USDT depreciation cycle and alleviating the panic of the Federal Reserve's initiation of interest rate cuts.

Just a few months ago, one USDT was worth 7.3 yuan. After the Fed cut interest rates, it depreciated to 6.9 yuan. Many people saw the market trend and avoided the big corrections in July, August and September, but the result was that even without investing, their assets shrunk by about 6%.

Looking back at history, during the last interest rate cut cycle from August 2019 to March 2020, the USD/RMB exchange rate changed from 7 to 6, and USDT, a stablecoin pegged to the US dollar, also depreciated during this period. In September, the Fed's interest rate cut cycle started again, and the depreciation of USDT will follow suit.

First, the Fed's interest rate cut actually increases the supply of dollars, and oversupply will lead to depreciation. Second, the United States continues to repay old debts with new debts. This "snowball" approach has made the U.S. debt crisis more and more serious, making dollar assets less attractive and easily leading to a depreciation of the dollar.

Not only is the US debt default a "time bomb", the first 50 basis point interest rate cut in history was also accompanied by a disaster in the financial market. Therefore, the market still needs to be cautious about the possibility of USDT continuing to decline in the semi-long term.

Spencer Jakab, a columnist for the Wall Street Journal (WSJ), warned that the market rebound triggered by the Fed's announcement of a 50 basis point interest rate cut in September was very similar to the situation before the bankruptcy of Lehman Brothers in 2007, when the market crashed after the surge. He believes that the current easing cycle initiated by the Fed cannot save the market.

But on Monday, USDT/CNY rebounded.

China’s central bank cut its short-term policy interest rate as part of a rate cut effort that began in July as a slowdown in the domestic economy deepens, Bloomberg reported.

China's central bank on Monday cut its 14-day reverse repurchase rate to 1.85% from 1.95% previously.

The central bank also injected 74.5 billion yuan, or about $10.6 billion, of liquidity into the banking system through the facility, the central bank said in a statement.

The move comes ahead of the seven-day National Day holiday starting October 1.

China's central bank typically offers 14-day loans ahead of long holidays.

The last time the central bank provided such loans was in February, ahead of the week-long Lunar New Year holiday.