The US Dollar Is Rising, But The Rally Is Likely To Moderate.

Driven by 3 factors, the US economy is basically good, the Fed raised interest rates and the central bank's monetary policy differentiation, the US dollar continued to rise against other major currencies in 2015, and the US dollar index for the other 6 major currencies increased by more than 9% over the whole year.

Market analysts believe that the 3 factors will boost the US dollar in 2016, but the rally may become more moderate.

The US economy was eye-catching in the context of the slowdown in the world's major economies in 2015.

The latest figures from the US Department of Commerce show that in the third quarter of last year, the real GDP of the United States increased by 2.1% at an annual rate, which is 1.5% higher than the initial estimate.

Meanwhile, the US labor market continued to improve, and the non-agricultural employment data exceeded the market expectations during the year. The unemployment rate is basically close to the "full employment" level recognized by the economists.

The US outlook for 2016 is good and will continue to support the US dollar.

According to the United Nations report on the world economic situation and outlook released in 2016, the economic growth of developed countries will continue to rise at a cyclical stage, and the US economy is expected to grow by 2.6% in 2016, slightly higher than 2.4% in 2015.

In view of the sustained recovery of the US economy, the Federal Reserve announced the first rate increase in nearly 10 years last December 16th, raising the federal funds rate by 25 basis points to 0.25% to 0.5%.

After the announcement of the rate hike, the dollar index rose sharply, then fell. It fell 0.28% to 97.940 in the market of New York, and rose 1.39% to 99.233 the following day.

Jay Morlok, an economist at FTN financial company, pointed out that although the interest rate increase is good news for the US dollar, the Fed said that the pace of raising interest rates after the first increase in interest rates would be very gentle.

Pressure causes a certain degree of fluctuation.

Moreover, the news of the Fed's interest rate hike has been digested ahead of time, and the US dollar index has broken through the 100 mark at the end of November.

The expectation of stronger US dollar triggered the market's concern about the depreciation of the renminbi.

In this regard, Savage said that the renminbi is now pegging to a basket of currencies, including the US dollar, the euro and the yen, not only the US dollar, but also the upward movement of the euro and yen will also affect the trend of the renminbi.

In addition, the possible impact of a strong US dollar on emerging economies has also led to many arguments.

Some market analysts believe that there will be a significant impact; some experts believe that the impact strength is limited because the market expectations have been digested for quite a long time, and the interest rate rises may cause the risk to be eliminated.

Compared with the financial crisis in the 90s of last century, emerging market countries now have more flexible exchange rate system and larger foreign exchange reserves, which reduces the possibility of triggering a new financial crisis.

In addition, market analysts believe that for the emerging economies with good economic conditions, the strong dollar has its positive side. The strong domestic demand of the United States has also contributed to the export of some countries.

In addition, the differentiation of monetary policy between the United States and other major economies is also an important reason for the strong US dollar in 2015.

The Central Bank of Europe and Japan have repeatedly reiterated that they will continue to maintain a loose monetary policy when the Fed enters the path of raising interest rates.

The European Central Bank has fully launched quantitative easing since March last year.

It aims to lift the low inflation rate in the euro area and stimulate the recovery of the real economy.

After the announcement, the euro reached a 1 to 1.0536 intraday exchange rate against the US dollar, the lowest level since April 2003.

Last December,

And the Bank of Japan further expanded monetary stimulus measures, but the degree of easing is lower than market expectations, the dollar against the euro, the yen exchange rate pressure downward.

Chen Kaifeng, chief investment officer of the global hedge fund at San Shan capital and guest professor of New York University, said that the future trend of the US dollar will mainly depend on the speed of the Federal Reserve raising interest rate and the next step of quantitative easing by the European Central Bank and Japan's central bank.

In general, if the Fed continues to raise interest rates, the dollar will continue to rise, but if the European and Japanese central bank's easing policy is lower than the market expectations, it will lead to a drop in the dollar.

It is widely expected that the pace of raising interest rates after the Fed will not be too radical.

Yellen said on the day of raising interest rates, the pace of the Fed's subsequent interest rate increase will depend on economic data. The pace of normalization of monetary policy will be prudent and gradual, but not necessarily at a mechanical and uniform pace.

If the economic development is "disappointing", the Federal Reserve will implement a more relaxed monetary policy.

Robert Savage, chief executive of CITIC Capital's hedge fund CCTRACK, said that when the federal benchmark interest rate was below 1%, raising interest rates would not have a big impact on the real economy of the United States. It is expected that the dollar will rise strongly in the first 3 to 6 months in 2016. During this period, the US dollar index is expected to rise to 102 to 104. However, by the second half of 2016, the US economic growth rate will slow down and the US dollar index will also fall after the federal benchmark interest rate exceeds 1%.