China News Network, September 9 (Zhongxin Finance Gong Hongyu) The US dollar, which has risen for several weeks, has suddenly fallen!
On September 9, the exchange rate of the US dollar against more than ten major currencies such as the euro, the Japanese yen and the British pound fell across the board. Among them, the exchange rate of the US dollar against the Japanese yen and the Australian dollar fell by more than 11% during the day. The renminbi soared against the dollar, with the onshore renminbi up more than 1 basis points during the day.
Infographic: US dollars. Photo by Liu Yanghe
What happened to the dollar?
Prior to this decline, the US dollar had been very strong for some time.
As of September 9, the dollar index has risen for eight consecutive weeks, supported by factors such as the Fed's interest rate hike. Media reports said it was the longest winning streak in nearly nine years for the dollar index, and the Bloomberg dollar spot index even recorded its longest weekly gain since its inception in 8.
At the same time, other currencies came under pressure to depreciate. The euro fell against the dollar for eight weeks, the yen plummeted, the rupee hovered near record lows and the renminbi hit its lowest since 2007.
Recently, the yen took the lead in opening a rally against the dollar under the influence of "hawkish" statements by the head of the Bank of Japan suggesting that Japan may end negative interest rates when prices and wages continue to rise. The exchange rate of the US dollar against the yen fell as low as 11.145 on the 90th, down more than 1%.
Wang Youxin, a senior researcher at the Bank of China Research Institute, told China News Finance that because the yen occupies a large share in the formation mechanism of the dollar index, the rebound of the yen also drove the dollar index back from a high above 105. Not only that, as US inflation falls, the US dollar interest rate hike cycle is basically coming to an end, which also weakens the support factors of the US dollar.
Weekly candlestick chart of the dollar index. Source: Wind Data
Non-US currencies start a "counter-attack"
The dollar weakened, and non-US currencies that had been suppressed for months began to stop falling and recover. Taking the euro as an example, the exchange rate of the euro against the US dollar, which has fallen for nearly two consecutive months, regained 11.1 on the 07th.
The renminbi exchange rate soared. On the 11th, the highest point of the onshore yuan rose by more than 800 basis points, and the offshore yuan rose by more than 700 basis points, recovering most of the lost ground after last week's consecutive declines and returning to around 7.3.
On the same day, the special conference on the self-discipline mechanism of China's national foreign exchange market was held in Beijing. The meeting believes that with the introduction and implementation of China's policies to stabilize the economy and stabilize expectations, the year-on-year growth rate of prices (CPI) bottomed out and turned positive, import and export data were better than expected, the effect of real estate policies gradually appeared, consumption picked up significantly, scientific and technological innovation continued to make breakthroughs, high-quality economic development continued to advance, the potential energy of economic "progress" was accumulating, and the RMB exchange rate maintained a solid foundation for maintaining basic stability at a reasonable and balanced level.
Infographic: RMB and USD. Photo by Li Jinlei of Zhongxin Finance
Expert: The dollar is more likely to fall in the future
Where does the dollar go from rising to falling? Yang Delong, chief economist of Qianhai Open Source Fund, believes that the dollar is more likely to fall in the future.
Wang Youxin analyzed that the recent recovery of the US dollar index is relatively fast, and it is less likely to continue to rise sharply in the future under the background of the imminent change in the Fed's monetary policy trend and the increase in downward pressure on the US economy.
"In the short term, the US economy still maintained moderate growth in the third quarter, and the US dollar will still be supported before and after the release of the GDP data at the end of October, but after entering November, the US economic data is expected to accelerate its decline, and the discussion about the Fed's interest rate cut next year will heat up, when the US dollar index will fluctuate and be revised down again." Wang Youxin said. (End)