Since the Federal Reserve started the aggressive rate hike process, the US dollar exchange rate has been soaring, and the strong dollar storm has set off a wave of global currency depreciation. The latest FOMC dot map shows that the pace of the Federal Reserve hike rate may also be difficult to stop until next year. Recently, many investment institutions have predicted that without major macro factors, the strong dollar trend will be difficult to completely reverse, and the dollar will continue to rise. has aggravated the market's speculation that most government organizations around the world will interfere in the foreign exchange market, that is, the government will take unusual market intervention measures to push up the value of the local currency.
Zhitong Finance APP learned that in the latest MLIV Pulse survey, about 45% of the 795 respondents predict that major powers in the world will try to lower the dollar exchange rate in a planned manner. The nearly identical proportion of groups said they expect Japan to increase efforts to boost the yen without the support of other countries. Two-thirds of respondents expect the Bloomberg dollar spot index to climb to an all-time high in the coming month or so.
strong US dollar set off a global currency depreciation storm
Most analysts believe that the main reason behind the surge in the US dollar exchange rate is that international investors seize the opportunity of the Federal Reserve's aggressive interest rate hikes and seek safe havens in the midst of market turmoil. For example, some investors in the UK, which is deeply in crisis, and have stepped up buying the US dollar for safe haven.
USD exchange rate continues to soar, pushing up the import costs of importing raw materials and fuels in USD denominated in various countries, making the economic situation in various countries increasingly serious. This puts further pressure on many central banks, which have been following the Fed to raise interest rates to curb consumer prices soaring.
At the same time, the unstoppable wave of strong dollar has also dragged down the gains of US companies as it reduces the value of overseas currencies. Nearly 90% of respondents expect corporate earnings to be more affected in the third quarter than the strong dollar in the previous quarter.
Wall Street investment institution Jeffery corporate hedge and foreign exchange solutions head, said: "The upward trend of USD will continue in the short term. But from a long-term perspective, the world will change, and some other currencies will rebound." "But human investment behavior tells me that it is difficult for the US dollar to fall now. "
The Fed's most radical austerity policy since the early 1980s has pushed up the dollar exchange rate, and also pushed up the U.S. Treasury yield. Bloomberg USD index rose about 14% this year, with the USD rising even higher against the pound and yen. The pound fell to an all-time low at the end of September as markets grew concerns over the UK government's stimulus package.
In September, the Japanese government intervened in the foreign exchange market for the first time since 1998, using US$19.7 billion to intervene in the foreign exchange market to boost the yen, but this unexpected move did not have lasting results. Unlike the Fed, the Bank of Japan has been maintaining the negative interest rate policy.
Quadratic Capital Management founder Nancy Davis said: "There are great differences in monetary policies of major central banks around the world. The Fed is very tough, while some other central banks are actually dovish." "This makes the US dollar extremely strong."
Most analysts believe that the government led by US President Biden has almost no motivation to lower the US dollar, because this may further increase the pressure on inflation in the United States. White House National Economic Commission Director Brian Deese said he does not expect any agreement between major economies to curb the dollar's strength.
The wave of foreign exchange market intervention is coming?
However, some respondents involved in the MLIV survey said that a larger increase in the US dollar exchange rate may trigger such government intervention measures.
USD is getting stronger and stronger - can it stop this trend?
The last large-scale coordinated action to lower the dollar exchange rate occurred in the 1980s, when Britain, France, West Germany, Japan and the United States agreed to take action known as the " Plaza Accord". Japan received intervention support from G7 (G7) after the 2011 tsunami and during the Asian financial crisis.G7 members also cooperated to support the euro in September 2000.
Any potential coordinated exchange rate intervention can lead to a sharp rebound in most currencies against the US dollar. The dollar depreciated by more than 10% in the two months after the signing of the Plaza Accord, and over the next two years, the total dollar depreciation rate peaked at nearly 50%. At present, many investors have established long positions in the US dollar, and intervention in the depreciation of the US dollar will trigger a wave of selling, which may lead to a deep crisis.
From UBS Global Asset Allocation Director Adrian Zuercher, Global Wealth Management, said in an interview with the media that pound and the euro are already in a "semi-currency crisis". If this situation continues, eventually some countries "may even need central banks to participate in coordinated intervention."
US dollar strengthened - US dollar bulls were collectively carnival, and some companies were "very hurt".
US dollar strengthened also caused harm to some stock investors. survey shows that nearly 90% of respondents said that corporate performance in the third quarter will be more significantly affected by the US dollar trend. Will the USD 3 put more pressure on companies? Asked about the impact of US-based multinationals
Microsoft (MSFT.US) warned in June this year that the strengthening of the US dollar is hurting the company's profit levels. According to data collected by Bloomberg, analysts and executives mentioned the dollar more than 1,000 times in three years during the earnings call for the second quarter earnings quarter, the most in three years.
"Hedging rates and forex are the most concerned issues for people," said Lewis, of Jefferies. "For most companies, 5% or 10% volatility in a currency is negligible, but 20% volatility is a serious challenge they have to face."
Some MLIV respondents also listed debt crises, refinancing and liquidity issues in emerging markets as potential threats brought by the continued rise in the US dollar this year. energy crisis has also been mentioned because the appreciation of the US dollar has made the price of commodities in US dollars more expensive, further pushing up the already high inflation rate in these countries and regions.
