We show that US monetary policy is transmitted internationally through the factor

structure of exchange rates. Following an unexpected easing, investment funds sell

safe and buy risky currencies. Global US banks, similarly, tilt their distribution of

foreign loan origination toward currencies of greater systematic currency risk. The

effects of monetary policy on currency flows and loans persist for several months and

feed into the leverage and real investment decisions of firms and, in particular, those

that operate using a high-risk currency. We argue that currencies’ factor exposures

are a lens through which we can understand the international transmission of US

monetary policy.