SMM, Jan. 9 / PRNewswire-Asianet / the policy uncertainty brought by the Trump administration and concerns about the Fed tightening monetary policy triggered by sluggish inflation in the United States have deprived the dollar of momentum in 2017, since it fell below the 100th mark at the beginning of the year. The dollar fell all the way, falling as low as near the 90 mark, and rose slightly in September as the Fed announced tax reform plans for October and November and interest rate increases in December, during which time the U.S. index rebounded. But then it fell here, and after entering the New year, it fell below the 92 mark at one point. Across 2017, the dollar is down more than 10%.
The euro, on the other hand, performed amazingly in 2017. driven by a sustained recovery in the eurozone economy and the ECB's plan to scale back its QE, the euro outperformed other major currencies in 2017 and rose more than 10 percent against the dollar. The best annual performance in 14 years. The euro was pushed higher by the dollar before September, above the 1.20 mark, and after September was hit by the dollar's strength and entered the concussion, but then the dollar fell and the euro returned to the 1.20 level.
The renminbi successfully "countered" in 2017. At the end of the year, the onshore renminbi rose more than 270 points against the dollar and broke through the 6.51 mark, up 6.72 per cent for the year, its biggest annual gain in nine years. The reversal of RMB exchange rate trend is the result of the interaction of policy and fundamentals. on the one hand, the central bank has issued a new formation mechanism of RMB against the US dollar, and introduced a "counter-cyclical adjustment factor" to guide the market to expect a turn; On the other hand, China's economic resilience, foreign exchange reserves back to more than $3 trillion, capital outflows have been effectively alleviated, so that the renminbi staged a "Jedi counterattack."
Previously published by SMM in November, "where does the dollar end up at the end of the year?" how do risky assets behave? In response to the decline in the US dollar and the future trend of the US dollar, Wang Zirong, the guest interviewed, said that the US dollar may return to line 91. Jiang Xingchun, director of Soochow Futures, said that the overall weakness of the US dollar in 2017 was mainly due to the strength of the European currency, in addition to the US government's desire to weaken the US dollar and reduce its debt. As for the interest rate increase in the United States and the tax reform, the interviewees all thought that it was a preliminary hype and that it might not be as good as expected in the future. At the end of the year, the trend of the dollar also confirmed the previous view.
In response to the dollar's decline in 2017 and the weakness of the start of the year, SMM interviewed Dr. Wang Zirong, chief adviser to Rongcai assets, and Zhong Yuan, a researcher on Anliang's futures strategy, to explore the reasons for the dollar's decline. From the point of view of national interest, the two men gave the view of the weakening of the US dollar.
Mr Wang said it was in the US interest for the dollar to fall. Trump, who is also a real estate businessman, wants the United States to increase exports and balance import and export trade. It is also in the interest of the Trump administration. If real estate rises, it will generate more revenue, so Trump will strengthen the construction of infrastructure roads and bridges.
Zhong Yuan also said that from the point of view of US households, the asset bubble represented by US stocks is huge, and the unwinding needs to be supported by the return of the US dollar. In addition, the US government, headed by Trump, represents the interests of the big bourgeoisie. The probability of local wars has increased since Trump came to power, such as in the Middle East, and the most direct manifestation has been the rise in crude oil prices. In addition, the relaxation of monetary policy is also in the interests of the big bourgeoisie.
In addition, the strength of the renminbi contrasts with the weakening of the US dollar, Mr Wang said: the future tone of the renminbi is internationalised and, in the long run, the renminbi is appreciating. As a big import and export country, the appreciation of RMB is also conducive to China's import business. After China's import and export trade balance, China's Belt and Road Initiative will accelerate the process of RMB internationalization, indicating that the continued strength of the RMB is in China's national interests.
On the future of the dollar, Mr Wang said the dollar had previously had an absolute say on commodities, while the weakening of the dollar's voice on commodities as the renminbi and the euro rose changed the pattern of the past. As other currencies rise, the dollar will continue to weaken. Technically, the top of the dollar is more than a hundred, and in the long run technical measurements will fall to about 80.
Zhong Yuan, on the other hand, believes that the dollar will continue to weaken in the larger direction. At present, the United States needs the dollar to return to support, the phased dollar in the first half of 2018 may be relatively strong, the second half will weaken. In addition, the United States debt is huge, so a weaker dollar is more in the interest of the United States.
Into the New year, all kinds of heavy data followed, non-agricultural data better performance did not give the dollar a boost, and even the dollar once broke the 92 mark. But the market has good confidence that the United States will raise interest rates, and the dollar is back above 92. After last year's US tax reform and interest rate rise, the dollar fell, and the market refocused on this year's rate rise. Recent speeches by Fed officials and the subsequent replacement of the Fed chairman need to be closely watched.