The recent rebound of the dollar, fear of impact on the economic recovery of emerging markets.
In the U.S. economic outlook, the U.S. bond interest rates climbing, the dollar against major currencies to stop depreciation back up, the dollar index last week, a cumulative appreciation of 1.2%, up more than 2% this year. Investment institutions pointed out that this shows that investors do not think the global economy will be as strong as expected recovery, some experts are more worried about the dollar if the continued appreciation, may hurt the economic recovery of emerging markets.
After the U.S. presidential election last November, most investment institutions and analysts are bearish dollar index, some experts predict that the dollar will depreciate by more than 20%, because investors bet on other countries bullish stock markets and assets, investors will withdraw funds from the dollar assets.
However, from November last year to January this year, the dollar only depreciated 3.7%, after which it stopped falling and rebounded. The U.S. dollar index has appreciated by 2.3% this year to 91.977, and the dollar has appreciated by 5% and 4.9% against the Swiss franc and The Japanese yen, respectively, as well as 2.5% against the euro and 2.5% against the Mexican peso and the Brazilian lire and other emerging currencies, making investment institutions more worried.
Experts believe that the dollar has room to appreciate. Citi believes that the dollar may be bottoming out, JP Morgan strategist team also recommended to do more dollar against the yen, and the dollar against the Swiss franc, and raise the dollar against the yuan exchange rate target, because the U.S. bond yield climbing is expected to support the dollar, and the United States is expected to pass a super large-scale stimulus package, economic growth rate may exceed the emerging markets such as mainland China.
Strategists also believe that the dollar may rise above the 110 yen price level against the yen in the next few months and rise to 113 yen in the middle of this year.
Some experts are concerned that the strengthening of the U.S. dollar and higher U.S. bond yield will tighten the financial situation in other countries, thus limiting the momentum of economic recovery in these countries, especially unfavorable to emerging markets.
Fidelity International Group global overall economic director Ahmed pointed out that if the dollar suddenly strong, emerging assets may appear selling pressure, but the vulnerability of emerging currencies will not be as high as in 2013 when the “shrinkage panic”.
Experts were originally bearish on the U.S. dollar, mainly because the global market is expected to “reflation” market, but now this expectation began to weaken; Europe because the vaccine is not as fast as the United States, so the recovery force is also weaker than the United States.
This year, the U.S. 10-year bond yield has rebounded by more than 50 basis points, while other major countries’ yield rebounded at a relatively slow pace; the gap between the U.S. and Japan’s yield has expanded by about 50 basis points, and the gap between Switzerland and Germany‘s yield has expanded by about 30 basis points, indicating that holding the U.S. dollar is more favorable than other major currencies.
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