The most important driving factor for the recent breaking of the US dollar index is the rapid depreciation of the yen against the US dollar. In fact, since the middle of last year, the most important driving factor for the upward trend of the US dollar index is that the Federal Reserve has shown a tougher stance on monetary policy than the European Central Bank and the Bank of Japan.
In the past, in the process of the upward trend of the US dollar, the exchange rate of the US dollar against emerging market economies and the exchange rate of the US dollar against developed countries rose simultaneously. In the current round of rapid upward movement of the US dollar index, the performance is different. The exchange rate of the US dollar against emerging market economies is basically stable. Recently, in the process of accelerating the upward trend of the US dollar to break 100, there has also been the depreciation of the US dollar against the currencies of some emerging market economies, especially energy countries.
We believe that an important reason is that in the process of the rapid rise of the US dollar index, emerging market economies have maintained a relatively high trade surplus, driven by manufacturing exports or energy trade.
Looking forward to the follow-up, considering that the market’s policy misplaced trading of the Federal Reserve has lasted for a long time compared with that of the European Central Bank and the Central Bank of Japan, the upward momentum of the US dollar index is weakening from the direct impact. In terms of indirect impact, the demand for global commodity trade weakens this year, and the subsequent manufacturing exports and energy exports of emerging markets may fall, but the transaction may need to be carried out gradually and will not be achieved overnight. Overall, we judge that the follow-up dollar still tends to rise, but the space is relatively limited.
Referring to the historical performance, if the upward space is relatively limited after the dollar breaks through 100, the performance of major categories of assets is as follows:
It is expected that U.S. stocks still have a high opportunity to obtain positive returns, but the returns are relatively limited. Hang Seng index may have some risks, but the risks are also relatively limited.
The direction of 10-year US bond yields and international oil prices is unclear.
Gold is likely to depreciate.
As for Chinese assets, there are limited samples to refer to, and there is pressure on stocks, bonds and remittances.
Risk tips: the global economic slowdown exceeded expectations, the slowdown of Global trade growth exceeded expectations, the development of China’s epidemic exceeded expectations, and the exchange rate adjustment between the US dollar and RMB exceeded expectations.
