Due to the global "pandemic" of the new crown epidemic, US stock has plummeted for 4 weeks, and there were four "circuit breaks" dangerous situations in one month, which can be regarded as the darkest time for in the history of US stocks. The Dow Jones Index fell from its high of 29,568 points this year to a low of 18,917 points on Wednesday, Eastern Time. The maximum drop of was 10,651 points or 36%, which was too tragic!
However, during the global stock market crash, the dollar index has continued to rise sharply for 2 weeks recently, from falling for two weeks, and then V goes up for two weeks, which also surprised us greatly. After the US dollar hit a low of 94.617 on March 9, it began to rise all the way. As of Wednesday, Eastern Time, the US dollar closed at 101.36, with a maximum increase of 7.13%.
Why did the US stock market plummet and the US dollar surge?
Monk believes that the main reason is that under the panic of "cash is king", the liquidity of the US dollar market is insufficient.
Let’s look at it from two perspectives:
1. The spread of the new crown epidemic impacts all areas of the economy and society, and the world has triggered an unexpected panic sentiment. At the same time, the sharp drop in oil prices hit a new low of about 20. Global risky assets and safe-haven assets have been abandoned indiscriminately, and cash is the king to compete for the strongest liquid safe-haven currency , causing the US dollar to continue to rise in supply and demand.
Chicago Options Exchange (Cboe)Volatility index VIX closed at 76.45, setting a new record of 84.81 again during the session. market is reacting to fear and uncertainty .
Under this constant panic market trading sentiment, gold has also been subject to continuous liquidation.
2. The US dollar index is an exchange rate index , not the US dollar price. The
US dollar index reflects the direction of non-US currencies. With the pandemic, countries have successively introduced monetary and fiscal measures to treat all areas of the economy and society. In particular, the implementation of monetary policy has significantly cut interest rates and loosely released currency volume, which has caused depreciation of currencies in various countries and prompted the US dollar index to rise. At the same time, it will also promote the outflow of hot money in various countries, and flock to the US dollar market, thereby driving the US dollar index to rise sharply.
data shows that on the 18th, the pound fell by more than 5% against the US dollar, setting a new low since 1985 and becoming the worst member of the foreign exchange market. The pound has fallen by more than 12% against the US dollar since the beginning of the year, and the pound has also fallen by 9% against the euro .
The pound trend is exactly the opposite of the US dollar index, and the non-US currency trend is basically the same as the pound trend.
In summary, the strengthening of the US dollar index is ultimately due to insufficient market liquidity and the market demand for the US dollar is very large.
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