US Dollar Liquidity Tightens &Nbsp; European Banking Financing Difficulties Are Approaching.

In less than a month, the 3 month dollar interbank offered rate (Libor) broke through the 0.4% and 0.5% passes, and many agencies even predicted that the 3 month dollar Libor could soar to 1.5% in the next few months. "At present, the liquidity of the US dollar is widespread in the banking industry in Europe, and many banks are hoarding the US dollar." Yesterday, Richard Eli, chief Asia economist at Paris Bank of France, told reporters that "although the European banking industry is far from another crisis, it is not yet the time for the red alert to be heard, but now it has already heard the orange alert and needs to pay close attention to the situation of the European banking industry." (Richardlley)

　　 Libor will continue to rise sharply

The dollar has become a hot commodity again, which is particularly evident in Europe today. A foreign bank internal staff told the international finance Daily: "the feeling in the Chinese market may not be deep, but outside the bank, banks are more cautious, and the willingness of banks to lend money to the US dollar is relatively low, and the atmosphere of wait-and-see is quite strong."

"The sovereign debt crisis has forced European governments to solve the huge fiscal deficit problem. To solve this problem, increasing taxes is a major tool of the government," said Hua Min, director of the World Economic Research Institute of Fudan University. The increase in taxes will inevitably lead to the withdrawal of foreign capital, while foreign capital needs to convert the euro into US dollars when it withdraws from Europe. This is a rational reaction of the market to the European sovereign debt crisis, but it will inevitably cause us dollar interest rate to rise.

What is more serious now is that banks with liquidity constraints are not limited to countries with prominent sovereign debt problems such as Greece and Spain, including other banks such as UBS, Barclays and other euro and non eurozone banks. According to people familiar with the matter, because of the lack of US dollar funds, Swiss banks last week reduced the US dollar short positions from the usual 80 billion US dollars to US $20 billion.

After last week's Libor breakthrough of 0.53% to its highest level in nearly 10 months, JoeAbate, Barclays Capital currency market strategist, said: "in the next two weeks, the 3 month US dollar Libor will rise to 0.6%." Citigroup's research report also pointed out that in the next few months, the 3 month US dollar Libor will probably jump 1 percentage points.

"In May 22nd, the Spanish Central Bank took over the CajaSur of the savings bank, raising the worries of the European banking industry, thereby stimulating the rise of the US dollar Libor. Last Friday, Fitch Ratings lowered Spain's sovereign rating. At least in the short term, the European banking sector is not optimistic, and any adverse news is likely to stimulate the US dollar Libor to rise sharply.

　　 European banks face run risk

The devaluation of the euro against the US dollar (1.2275, -0.0028, -0.23%) and the European sovereign debt crisis can not achieve any substantial improvement, making the market's long-term interest in the euro becoming more and more widespread. "In the long run of the euro, European banks will face the risk of a run," he said. Unless banks are well prepared for risk control and have enough dollar reserves, at present, even the ECB's dollar reserves are not large. "

Earlier, the Federal Reserve and the European Union jointly rescue the market and restart the currency swap agreement with the Central Bank of the European Central Bank, which alleviated the tension of the European dollar to a certain extent. However, the Chinese people pointed out: "currency swap is not without cost. In the case of the depreciation of the euro, the willingness of the US Federal Reserve to hold the euro will decrease, and the cost of currency swap will also increase. This is not a permanent solution for Europe."

"However, because the US dollar Libor has a strong linkage with the Fed's interest rate, once the interest rate spreads between the US dollar Libor and the US Federal Reserve are too large, the Fed will face pressure to increase interest rates. At present, the Fed's willingness to raise interest rates is not strong enough, and the Fed may give some support to the ECB. Xi Junyang, deputy director of the modern financial research center of Shanghai University of Finance and Economics, said: "if European banks retain their US dollar positions for a long time, they will gradually lead to higher financing costs, thereby affecting the struggling European entity economy."

China believes that the current problems facing the euro are not the same as those faced by the US dollar in 2008. "Europe is facing fundamental problems," he said. Unless the EU adopts extreme measures of capital controls, it will be difficult to alleviate the current risks faced by European banks.