In the past 20 years, our understanding of the currencies of various countries has been that the euro is "more expensive" than the U.S. dollar.
But in the magical year of 2022, the euro has fallen to its lowest level in 20 years.
In recent months, the price of natural gas in Europe has soared, and the inflation rate in the Eurozone has continued to reach new highs, with the inflation rate in June reaching 8.6%. Affected by this, the euro has continued to depreciate against the U.S. dollar. Since the beginning of the year, the euro has depreciated against the U.S. dollar by nearly 11%. Last week, shorting the euro became one of the "most popular trades."
html On July 11, the euro fell to 1.0033, the lowest level in 20 years since December 2002, against the US dollar, and finally closed down 1.42% at 1.0037.
html In intraday trading on July 12, the euro against the U.S. dollar finally fell to the important psychological level of 1.0000. At the same time, the U.S. dollar index broke through 108, hitting a new high since 2002.
The exchange rate of the RMB against the euro has also appreciated a lot in the near future
We all know in foreign trade that when a country's local currency depreciates, it means that import costs rise and export profits increase, which is good for exports but not good for imports.
Under the current circumstances, many foreign traders exporting to the European market have reported that orders have decreased and the frequency of buyers placing orders has slowed down.
Global foreign exchange shock
Recently, the global market has not been too calm. A historic moment was born: the U.S. dollar index broke through 108, rising nearly 1% during the day to 108.16, continuing to hit a new high since June 2002. What exactly happened to
and what was the impact?
This Monday may be an unforgettable day for foreign exchange investors. Global non-U.S. currencies plummeted across the board. First of all, the Japanese yen fell very sharply, reaching more than 16,000 points at one time.
According to Japanese Kyodo News report, the exchange rate of the Japanese yen against the US dollar fell to a range of 137 to 137.50 yen per US dollar on the 11th. Affected by expectations of widening interest rate differentials between Japan and the United States, the momentum of buying U.S. dollars and selling Japanese yen has intensified, and the Japanese yen has depreciated to a new low in about 24 years.
Secondly, the euro has shown a trend of selling off . On Monday night, Beijing time, the euro fell sharply against the US dollar. During the North American trading session, the euro fell 1.5% against the U.S. dollar to 1.0032, just shy of parity. The last time EURUSD reached this low was in 2002.
Thirdly, although China's financial data in June far exceeded expectations, the offshore yuan still failed to show strength. It reported 6.7259 yuan against the US dollar at 04:59 Beijing time on the 12th, which was lower than the late trading in New York last Friday. 397 points.
html On July 12, the onshore RMB exchange rate against the U.S. dollar opened sharply lower by more than 320 points, at 6.7398. At the same time, the offshore RMB against the U.S. dollar plummeted, approaching the 6.74 mark.
Finally, the key among the key, the U.S. dollar index stands out, rising more than 1% during the day, breaking through the 108 mark, setting another 20-year high.
Major non-US currencies all showed large declines against the US dollar. Among the G-10 currencies, the Australian dollar led the decline, Norwegian krone and New Zealand dollar also led the decline.
Previously, " Wall Street Journal " published an article titled "Strong US Dollar Wins Inflation Battle in New Turn in Currency War" and wrote, "The reverse currency war has begun, and the United States is winning. Again, just Just like the United States "won" the battle for dollar depreciation after the 2008 financial crisis, it is now winning the battle for dollar appreciation. "
According to previous standards, this performance of the U.S. dollar index may cause global liquidity problems. Since the interest rate hike in the United States has just begun, and the balance sheet shrinkage has just begun, liquidity in the market may still exist.
But as time goes by, if the economy cannot recover effectively, if the war between Russia and Ukraine continues, and if inflation cannot be controlled in time, a large amount of safe-haven funds may flow into US dollar assets, and global liquidity problems may arise.
What caused the dollar to rise sharply and non-US currencies to fall across the board
First of all, in last Sunday’s election for Japan’s upper house, the ruling coalition’s majority was consolidated and further expanded. This means that the Japanese people may still tend to support Abenomics and ultra-loose monetary policy. This expectation triggered an accelerated weakening of the yen.
Secondly, according to Bloomberg survey, the possibility of economic contraction in the Eurozone has risen to 45% from 30% in the last survey and 20% before the outbreak of the Russia-Ukraine war.
Germany deserves special mention because the country is very vulnerable to Russian energy supplies. If the country's output shrinks rapidly, as the largest economy in the euro zone, it will inevitably have an impact on the euro.
Third, it may be caused by the overall weakening of the global economy. It's not just the foreign exchange market that's experiencing severe turbulence, the commodity market is also performing poorly.
The world's major non-ferrous metals almost plummeted across the board. Whether it is foreign exchange, commodities , or the stock market, the root cause of turbulence is the imbalance of economic development. The Eurozone has been affected by the war between Russia and Ukraine, and its economic prospects have obviously become bleak.
Although the employment data in the United States are still good, due to high inflation, some data have already raised the alarm about a weakening economy. But, no matter what, the situation is much better than in Europe and Japan. Therefore, coupled with the Fed's interest rate hikes and balance sheet reduction, the US dollar index is naturally bullish.
The impact of the Russia-Ukraine conflict is still continuing, and the European market will continue to encounter energy shocks. In June, the Dutch natural gas futures standard contract soared nearly 80%, which was a huge negative for the European economy that relies heavily on Russian energy imports, and the euro was pressured lower.
Dr. Kissinger, an American political veteran, said that the first thing Biden should do now may be to end the Russia-Ukraine conflict. Almost all observers can see that only by ending this conflict can the global economy usher in a relatively stable development environment. Otherwise, the uncertainty of the war situation and the incompleteness of the industrial and supply chains will greatly affect investors' expectations.
BlackRock strategists say stock and bond markets, now in their worst years in at least 30 years, show no signs of a quick recovery. The ongoing Russia-Ukraine conflict and supply bottlenecks caused by labor shortages will keep price increases high.
