The Euro Broke Down &Nbsp, And The Dollar Came Back.

The euro has finally broken down again on Wednesday this week because of worries that the ECB is overly aggressive, and the US dollar index has soared in the past two weeks. The US dollar index rose sharply by 0.88% on Wednesday, and temporarily increased 0.24% to 80.688 on Thursday (up to 18:45 yesterday), the highest in the previous 80.747, reaching a 11 month high. From the trend, the dollar's pullback is more full, so the rally is expected to continue further, and the operation should continue to hold more.

ECB's overly aggressive anti Euro setback

The trigger for the euro's collapse is the data released by the European Central Bank on Wednesday. European Central Committee The assets of the bank jumped 239 billion 400 million euros to 27330 billion euros last week, the bank said on Wednesday. The scale has reached a record high. At this time last year, the ECB assets were only 19260 billion euros.

Under the impact of the news, the euro depreciated 0.99% on Wednesday and temporarily dropped 0.15% to 1.2921 dollars on Thursday. Euro zone currencies in the non euro area were also dragged down by the impact of the cross market, such as the pound fell 1.35% on Wednesday, and then fell 0.19% to $1.5430 on Thursday.

The so-called assets of the central bank actually refer to the amount of money printed. European Central Bank Manufacture Out currency The mortgages of these currencies to commercial banks with tight liquidity in the region are many bad assets. When the assets of the central bank are very large, it shows that the currency has been over issued in the early days and excessive loans have been issued.

The ECB increased its lending to regional banks, which was once seen as positive and caused the euro to rise sharply last Tuesday. The collapse of the euro on Wednesday is due to the same thing. This also prompts a truth that short-term profits and medium-term profits can be transformed, though it is hard to guess when.

Currency fear permanent dilution

If the central bank can increase its currency in a very short time, if it can recover loans after the crisis and spit out collateral, then it will not necessarily be equivalent to increasing the money in theory. At that time, the currency recovered will be canceled.

However, the loans issued by the European Central Bank may never be recovered, and the collateral may also become waste paper. If this happens, the result is a permanent issuance of money, and the purchasing power will naturally be diluted.

There may be more than that. When the market sees that the ECB is overly aggressive, there will be two positive and negative concerns in the market. At some time, the market will worry that the excessive issuance of banknotes will damage the purchasing power, but at the same time, it will worry about its ability to continue to print money or "courage" in another period, so that it can not help the European debt countries, resulting in a huge confusion in the short term.

Although there are similar cases in the United States, there is a fundamental difference between the US and Europe. The US super currency can be completely digested by other countries, so it does not necessarily dilute the purchasing power of the US dollar.

As we all know, the demand for euro assets is relatively poor this year. The euro is being avoided by other countries' sovereign funds and institutional funds, so the ultra developed currency can only be digested by Member States, and the consequences can be imagined.

Dollar bull

Last time, the author said that most of the US dollar callbacks should be ready, and they should be absorbed in the future. The US dollar index reached a high of 80.73, which has broken through on Thursday, but it has not yet stabilized. Because of the problems of the euro and the economic growth of the US, it is very difficult to stop the US dollar's rise in the future, and the chance to develop into a larger level of rising market is getting bigger and bigger.

There are many conditions for the strengthening of the US dollar. On the one hand, it is good for its own economy, and on the other hand is the weak currency of its rivals. Judging from the current situation, almost all of them are satisfied, though there are many problems in the long run, such as excessive money and insufficient income. Considering that the US dollar is the world currency, this factor can be greatly ignored.

In terms of rival currencies, the euro's weakness is needless to say. Although the yen is strong, the debt problem of the country in the next two to two years is not ruled out. In terms of traditional risk currencies such as sterling and Canadian dollar, because of China's economic downturn, the global risk appetite is not high, and these currencies are hard to sustain. This is also conducive to the US dollar.

This week, the US financial ceiling or some news, investors can pay close attention to, do not have to catch up too much, in case of more than expected negative news. But on the whole, the US deficit ceiling will not constitute a real drag on the dollar. The real threat to the US dollar is the emergence of a competitive rival currency in the future.