U.S. high inflation, USD index returns to a 20-year high. On August 23, the US dollar index rose by more than a month later.
At the same time, euro fell below the 0.99 mark against the US dollar, setting a new low in 20 years; the Korean won fell to a 13-year low against the US dollar; the Japanese yen fell to the 140 mark, shattering hopes of a rebound in the yen. The rapid appreciation of
USD will cause even greater damage to emerging markets. The central bank of emerging market countries consumes more than 2 billion US dollars of foreign exchange reserves to support their own currencies every working day. This year alone, India, Thailand and South Korea's foreign exchange reserves fell by a total of US$115 billion.
Dowmin Securities said that as the yield curve of US Treasury further reversal (a key indicator for the upcoming recession), currencies such as South Korean won, Hungarian forlin , Brazilian real and Mexican peso are most likely to fall to new lows.
Global economic slowdown boosts risk aversion demand
Eurozone liquidity tension and the wave of recession swept the world, and global economic growth continues to slow down. Against this backdrop of growing concerns about the risk of recession, the dollar's attractiveness as a safe-haven asset has strengthened.
The weakness of non-US currencies such as the euro, pound, and yen has given the impetus for the upward trend of the US dollar index.
According to media survey data, JPMorgan is the most pessimistic about the euro forecast. It expects the euro to fall to $0.95 by December. RBC capital markets are expected to fall by more than 5% over the same period to 1 pound against US$1.11, while Commonwealth Bank is expected to fall to 65 cents.
According to the latest data from US Commodity Futures Trading Commission , hedge fund 's net short bet on the euro has increased to a three-week high, while short bets on the pound have climbed to the highest level since March 2020. asset management company has also stepped up its shorting of the yen.
At the same time, the weakening of the euro is also driving the dollar index to strengthen. euro against the US dollar accounted for 57.6% of the US dollar index. The ECB adhered to its loose monetary policy position, causing the euro to continue to fall against the US dollar. is currently falling below the 0.99 mark against the US dollar, continuing to hit a new low in 20 years.
Federal Hawkish remarks help the US dollar index rise
US dollar index has reached its highest level in nearly 20 years. As of press time, the US dollar index was 108.78, but the market believes that the US dollar still has room for growth.
Federal Chairman Powell will make a comment at the Jackson Hall workshop later this week. analyst said Powell may strengthen his hawkish stance at the meeting, which will exacerbate the dollar's rise.
According to media, Nicky Shiels, head of metal strategy at MKS PAMP, said:
"Powell is expected to reiterate his determination to continue rate hikes to control prices. Even if their pace of rate hikes slows down, it will not turn quickly and rate cuts ."
Brown Brothers Harriman Global Head of Forex Strategy Win Thin wrote in its report:
"Even if the risk aversion impulse fades, the US dollar should continue to benefit from the relatively strong outlook for the U.S. economy and the strengthening of the Fed's tightening expectations."
Win Thin also said that the "Dollar's Smile" of does not seem to change, which means that the dollar will strengthen during the US economy's excellent performance or recession. In both extreme cases, investors see the dollar as an opportunity to ensure growth, or a relatively safe place to survive the storm and allocate cash.
As the US July CPI was previously announced, it triggered market expectations that inflation peaked. The expectation of a 75 basis point interest rate hike in September once cooled to 50 basis points, which also caused the US dollar index to fall below 106.
However, a series of hawkish remarks by senior Fed officials last week cooled down expectations of a peak rate hike. Hawkish St. Louis Fed Chairman Brad James Bullard and dovish San Francisco Fed Chairman Mary Daly both said they could raise interest rates by 75 basis points in September. Kansas City Fed Chairman Esther George also said he would not stop tightening policies until they "fullly believe" inflation is falling.
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