The US dollar has become the only asset that has soared, with global risky assets continuing to fall, and non-US dollar currencies falling continuously. The Asia-Pacific market was hit by the spillover effect. On the 28th, the Hong Kong dollar hit a weak exchange guarantee agains

is regarded as a risk-free yield on US Treasury yields as the "anchor of global asset pricing ". Rising yields increase the opportunity cost of investing in stocks relative to safe assets such as U.S. Treasuries, adversely affecting stocks and other risky assets. At the same time, due to the rise in U.S. Treasury yields, assets in other countries have lost their color, funds have poured into the United States and continued to push up the dollar. The US dollar index broke through the 114 mark on the 27th, and the short-term rise continued.

At present, international institutions have quite pessimistic views on US stocks. "Bond yields soared under interest rate hikes, extinguishing people's hopes for the stock market." Wilson said that although the 15.6-fold price-to-earnings ratio returned to the June low, the stock risk premium (ERP) is still insufficient considering the risk of an earnings recession (stocks are too low in price-performance ratios compared to bonds). The institution has also recently lowered its profit expectations. It can be said that the US stock market not only faces the pressure of "sniffing valuation" brought by interest rate hikes, but also faces the pressure of continued downward revisions in profits.

is currently close to 2% dividend yield compared to US stocks, and the coupon performance of 4% bonds is highlighted. "Our interest rate team has raised its 10-year Treasury target yield to 4% from 3.5%. This is a very difficult background for the stock market. In other words, with slowing earnings growth, capital costs are rising and liquidity is declining." Wilson said that the dollar has risen 21% compared to the same period last year and is continuing to rise. It is estimated that for every 1% change in the US dollar exchange rate, the S&P 500's earnings growth will be negatively affected by 5% (overseas income shrinks after being converted into US dollars), and the S&P 500's earnings growth in the fourth quarter will face about 10% resistance.

Morgan Stanley expects that under the basic assumption, the S&P 500 target price in the year is 3400 points, and in a bear market situation it will be 3000 points; last week, Goldman Sachs also cut the S&P 500's forecast from 4300 points to 3600 points, and believes that under the background of hard landing, it is not ruled out that it will reach 3150 points.

strong US dollar fell sharply in emerging markets

US dollar and US Treasury yields are still on the way to top, the interest rate spread between the US dollar and other currencies sharply expanded, resulting in the depreciation of the exchange rate of non-US dollar currencies.

Wall Street investment banks generally expect that the Fed will raise interest rates by 75BP (basis point) and 50BP in November and December, respectively, up 25BP from previous forecasts. The U.S. CPI surged 8.3% year-on-year in August, a figure slowing down from the previous two months, but it still hovered around its 40-year high. The core PCE has risen instead of falling, causing the market to worry that inflation has penetrated into every aspect of American life. Last week, Federal Reserve Chairman Powell had already shown his determination to continue fighting inflation.

Morgan Asset Management Asia chief market strategist Xu Changtai previously told reporters, "No one would suspect that the US inflation trend will peak and fall in the next 12 to 18 months, but the challenge is that the downward speed is much slower than expected, which will make the Fed rather maintain a tight monetary policy stance." The institution said that the current 2-year US Treasury yield is about 4.2%, which has not fully reflected the intensity of interest rate hikes. It is expected that the final federal funds rate will reach 4.8%.

At present, the actual effective exchange rate of the US dollar is close to the high since 2000. According to purchasing power parity, the US dollar is actually quite "expensive", especially relative to the euro, pound and Swedish Krone . But this does not mean that the US dollar will peak in the near term.

China AVIC Trust macro strategy director Wu Zhaoyin told reporters that the upward trend of US interest rates has not ended yet, and US Treasury yields often lead the federal benchmark interest rate to peak. If interest rate hikes peak in the first half of next year, then U.S. Treasury yields will probably peak at the end of this year, and the pressure on RMB depreciation may continue until the end of this year. Judging from historical data, it is difficult for the US dollar index to peak before the 2-year U.S. Treasury yield peaked.

"In the long run, we believe the Fed can successfully control inflation. When the interest rate outlook becomes clearer, the US dollar is expected to weaken from next year. But in the short term, the US dollar bull market has not yet ended." UBS said. At present, expectations from all walks of life that the US dollar index hit the 120 mark and broke through the 20-year high have heated up.

Affected by this, global markets, especially emerging market currencies and stock markets, continue to fall sharply. As of last week, based on the increase over the past year, the US dollar appreciated 17.43% against the euro, pound 20.84%, the Australian dollar 10.54%, the Korean won 21.15%, and the Japanese yen 29.95%, and the US dollar appreciated 10.36% against the RMB.

After the British government announced the tax cut plan, investors lost confidence in the pound, and the pound fell by as much as 4.7% against the US dollar on the 26th to 1.035. After the euro fell below 1:1 parity against the US dollar, the decline further intensified due to the recent leak of the "North Stream" natural gas pipeline, which was worsened by the recent injury to the European energy crisis, and the decline was further intensified, reaching 0.956 as of 11:20 on the 28th.

It is worth mentioning that since the Hong Kong dollar implements a linked exchange rate system that pegs to the US dollar, this has also led to the valuation of Hong Kong stock naturally being overvalued, which has intensified the pressure on Hong Kong stocks.

After defending the 32nd exchange rate system in the year on the 28th, the Hong Kong Monetary Authority bought a total of HK$215.035 billion and sold US$27.39 billion this year. On the same day, Hang Seng Index closed down 3.41%, hitting a new low since November 2011. Zhong Zhengsheng, chief economist at

Ping An Securities , said that Hong Kong's foreign exchange reserves can provide a complete guarantee of 1.75 times for the base currency, and the coverage of M1 ( narrow currency ) stock can also reach 1.1 times. The possibility of the current Hong Kong-related exchange rate system being lost is very small, but the negative impact of rising interest rates on the economy is worthy of vigilance.

CCCC International Chief Hong Kong stock strategist Zhao Wenli told reporters that in the second half of the Federal Reserve's interest rate hike, Hong Kong's local interest rates (interbank lending rates and best loan rates, etc.) have truly begun to follow, and the overall upward space is limited. "It is expected that the strength of the US dollar and US interest rates will converge after the November interest rate meeting, especially from the end of the year to the beginning of next year. The risk of the US economic recession will rise significantly, and the Federal Reserve needs to rebalance the dual goals of monetary policy to control inflation and stabilize employment."

RMB exchange rate remains basically stable

28, RMB opened fell below 7.2, hitting a new low since 2019.As of 16:30, the onshore RMB closed at 7.2458 against the US dollar, down 878 points from the previous trading day. As of 19:20 on the same day, offshore RMB was 7.238 against the US dollar.

The depreciation of the RMB is not an isolated case, but occurs in the context of the depreciation of non-US dollar currencies. This week, the CFETS (China Foreign Exchange Trading Center) RMB exchange rate index was 101.59, a slight decline from 102.09 last week, but almost the same as 102.14 at the beginning of the year, indicating that the RMB has basically remained stable against the currencies of its major trading partners, and its depreciation was mainly attributed to the strengthening of the US dollar index.

According to , the National Foreign Exchange Market Self-Discipline Mechanism Video Conference was held on the 27th. The meeting pointed out that since the beginning of this year, the RMB exchange rate has remained basically stable at a reasonable equilibrium level. CFETS RMB exchange rate index is basically the same as at the end of 2021. The RMB exchange rate against the US dollar depreciated, but the depreciation was only half of the appreciation of the US dollar during the same period; the RMB appreciated significantly against the euro, pound and yen, and is one of the few strong currencies in the world at present.

meeting emphasized that the foreign exchange market is of great importance and maintaining stability is the first priority. The RMB exchange rate remains basically stable and has a solid foundation. Compared with many economies facing the risk of stagflation, my country's economy continues to recover and develop in general, the price level is basically stable, and the trade surplus is expected to remain high. As the macro-policy effect appears, the basic economic situation will be more solid. "The current foreign exchange market operation is generally standardized and orderly, but there are also a few companies following the trend of "exchange speculation" and financial institutions' illegal operations. We should strengthen guidance and correction. We must realize that the point of exchange rate is inaccurate, and two-way fluctuation is the norm. Don't bet on the unilateral appreciation or depreciation of the RMB exchange rate. If you bet on a long time, you will lose."

28, the foreign exchange risk reserve ratio for forward foreign exchange sales business was officially put into effect. "The customer has not done forward foreign exchange purchases before, and now he may not be able to increase his investment." The head of a joint-stock bank told reporters. As the RMB falls below 7.2, coupled with the current 20% additional cost of foreign exchange purchase, some irrational or " herd effect " behavior may be suppressed.

BNP Paribas Foreign exchange strategist Wang Ju said that based on the 5% onshore dollar financing cost, 20% reserve may increase the cost of onshore enterprises' foreign exchange purchases by 1%. Based on the current spot price, this is equivalent to 716 points. In her opinion, the future trend of the RMB will depend on China's economic situation and the US dollar index.