The Depreciation Of US Dollar Is The Inevitable Result Of US Monetary Policy.

The continued depreciation of the US dollar has aggravated the uncertainty of the world financial market, and has also made many countries such as China face severe challenges.

Wang Yan, senior economist at the world bank, said recently that the depreciation of the US dollar is the inevitable result of the current US monetary policy.

"I think the depreciation of the US dollar is an inevitable trend.

This is because the current US current account deficit and fiscal deficit are increasing. In terms of economics, the depreciation of the US dollar is the inevitable result.

Wang Yan said.

Wang Yan, who has been working on financial research in the world bank for a long time, pointed out that after the outbreak of the US sub prime mortgage crisis, the Federal Reserve Committee increased the injection of financial institutions in order to save the market and allowed investment banks to borrow money from the central bank.

"This loose expansionary monetary policy is very unfavorable to support the US dollar exchange rate.

If we want to defend the value of the dollar, we should raise interest rates, but on the contrary, we should lower interest rates and increase liquidity, which will inevitably cause us dollar depreciation.

As for when the dollar bottomed out, Wang Yan believes there are still many variables.

"Many people may make predictions, but they are very unreliable.

Because this is related to the fundamentals of the US economy, and it is also related to investors and speculators' prediction of the US dollar trend, "Wang Yan pointed out." before the current financial crisis in the US is bottoming out, the US dollar will not be able to go out of the bottom of the devaluation.

In addition, if investors and speculators are not optimistic about the US dollar, they will sell US dollar assets, which will exacerbate the depreciation of the US dollar. "

According to the International Monetary Fund's recent report, the US economy will fall into a "mild recession" in 2008, and many economists including Wang Yan believe that the US economy may even fall into a "deep recession", which will further expand the US monetary policy and lead to further depreciation of the US dollar.

The continued depreciation of the dollar has also caused concern in many countries, and the main US trade partners have appealed to the United States to adopt responsible monetary policies.

US President Bush and finance minister Paulson openly stated that the United States still pursued a strong dollar policy.

But Wang Yan believes that the US government has actually abandoned this policy, because in the current economic situation, the depreciation of the US dollar has a lot of benefits to the US economy.

For example, the depreciation of the US dollar will help us export and reduce the current account deficit in the US.

"Although the depreciation of the US dollar has caused the rise in prices of oil and other products, this is not the most concerned policy makers in the United States. They are most concerned about saving the financial crisis, so they must inject a lot of money into it.

Its first choice is not to defend the dollar, but to prevent further deterioration of the financial crisis through expansionary monetary policy.

Wang Yan said.

The US leaders' talk about the "strong dollar" is intended to calm the market from a psychological level.

The depreciation of the US dollar has also increased the pressure of RMB appreciation. The RMB exchange rate against the US dollar has been "broken seven" recently.

In response, Wang Yan said that because of the depreciation of the US dollar and the huge trade surplus in China, the appreciation of the renminbi is inevitable. With the acceleration of the depreciation of the US dollar, the appreciation of the renminbi will probably accelerate.

But Wang Yan also stressed that the appreciation of the renminbi will have some impact on China's trade, but it will not produce too many negative effects.

"Because a large part of China's foreign trade belongs to the processing trade -- the raw materials and parts of many export products are imported from abroad. With the appreciation of the renminbi, the import parts become cheaper, and the appreciation of the RMB has little impact on the export of these products."

She explained.