The difference contract is a complex trading tool, and it is risk of rapid losses due to leverage.

You should consider whether to understand how the difference contract operates, and whether you have the ability to bear the high risk of losing funds.

The difference contract is a complex trading tool, and it is risk of rapid losses due to leverage.

You should consider whether to understand how the difference contract operates, and whether you have the ability to bear the high risk of losing funds.

The difference contract is a complex trading tool, and it is risk of rapid losses due to leverage.

You should consider whether to understand how the difference contract operates, and whether you have the ability to bear the high risk of losing funds.

News & Analysis

Market analysis

USD Index WeakensCarolane de Palmas

2023-07-17 10:59

As of July 12, the reporter reported that the U.S. Dollar Index had fallen 1.92% since July. At the same time, the onshore and offshore RMB exchange rates have rebounded against the US dollar. During the aforementioned period, the onshore and offshore RMB exchange rates have accumulated an increase of 0.72% and 1.04% respectively, both recovering from the 7.2 level.
Why does the U.S. Dollar Index weaken? Will it fall below the 100 point mark? Will the RMB exchange rate continue to rebound against the US dollar? Securities Daily reporters interviewed industry experts to interpret the above issues.
Long term decline of U.S. Dollar Index
It's a high probability event
Why did the U.S. Dollar Index, which had been "all the way up", show a downward trend? Feng Lin, a senior analyst at Dongfang Jincheng, stated in an interview with Securities Daily that this is mainly due to two reasons. On the one hand, the US non farm data in June fell short of expectations, and the market's expectations of the Federal Reserve's policy changed, driving the U.S. Dollar Index index down; On the other hand, since the end of June, US bond yields have continued to rise. However, due to the European Central Bank's firm stance on interest rate hikes and other factors, the increase in European bond yields has been even greater in recent trading days. Against the backdrop of the narrowing of US European bond spreads, the US dollar has continued to depreciate against the euro since July 6th. Given that the euro has the largest weight (57.6%) in the U.S. Dollar Index, this is also a direct factor driving the recent downward trend of the U.S. Dollar Index.
The recently released US employment data unexpectedly "exploded". In June, the US added 209000 new non farm jobs, far below the expected 225000, reaching the lowest level since December 2020. In addition, the total number of new jobs added in the United States in April and May was 110000 lower than before the correction.
"The continued weakening of the U.S. Dollar Index since July is not only affected by the changes in the economic and financial situation of the United States itself, but also related to the continuous interest rate hikes by the central banks of other developed economies." Wang Youxin, a senior researcher of the Bank of China Research Institute, also told the Securities Daily that from the perspective of the United States itself, the downward pressure on its economy has gradually increased, the recovery of its manufacturing industry has been weak, and the growth rate of consumption has fallen back, especially the inflation pressure has significantly eased, The market is gradually digesting and fully pricing the expectation that the Federal Reserve will continue to raise interest rates in July, but there is increasing disagreement on whether to continue raising interest rates in September, and the focus of policy formulation is gradually shifting from inflation to economic downside risks. In addition, the risk of default on US Treasuries has gradually eased, and the risk aversion sentiment has declined, weakening the support for the US dollar.
As the U.S. Dollar Index continued to fall, the market also began to discuss whether it would fall below the 100 point threshold. Wang Youxin believes that in the short term, under the background that the Federal Reserve will continue to raise interest rates in July and the U.S. economic growth rate in the second quarter may remain above 2%, the possibility of the U.S. Dollar Index falling directly below 100 points is relatively low, and more likely it will continue to fluctuate between 100 points and 104 points. However, the supportive effect of the Federal Reserve's tightening monetary policy on the US dollar will further weaken, and a drop below 100 points will be a high probability event, which is likely to occur at the end of the third quarter or the beginning of the fourth quarter.
Stage of maximum pressure on RMB depreciation
Or has passed
On the impact of the fall of the U.S. Dollar Index on the RMB exchange rate, Feng Lin said