Why Will The US Dollar Go Higher Due To The Devaluation Of RMB?

In the past 12 months, the RMB has fallen by 4.8% against the dollar, and is now approaching a low of five years.

US employment figures are weaker than forecasts, but failed to reduce expectations for the fed to raise interest rates this year. Traders are expected to raise interest rates by 59% in December.

If the Federal Reserve does not raise interest rates before the election, December will be the only time to raise interest rates.

But a lot of other things may happen before that.

Many times this year, the Federal Reserve hopes to pave the way for raising interest rates, but accidents always make it impossible.

We still expect

The pace of raising interest rates will be faster than the current market pricing. In December, interest rates will rise, and interest rates will rise two times next year.

This will support the US dollar, but the dollar will not rise sharply.

The US dollar Libor rose to a seven year high, increasing the interest cost of Chinese companies' $585 billion debt, prompting them to repay overseas loans and adding devaluation pressure to the yuan.

The rise of Libor is due to the restructuring of money market funds.

Weaken.

As traders expect the fed to raise interest rates more than 50% this year, Libor is expected to maintain high levels.

According to the median estimated value of analysts surveyed by Bloomberg, the three month US dollar Libore will be 0.85% and 1.38% respectively at the end of this year and 2017, and last Friday, 0.84%.

CITIC Securities fixed income research director, who worked in the central bank's monetary policy department, clearly stated that the dollar interest rate of Chinese enterprises was mostly determined by Libor, so when Libor rose, the pressure on exchange rate would rise.

Since China let the yuan depreciate in August last year, the repayment of foreign debt has been an important factor in promoting the weakening of the renminbi.

According to the latest data from the Bank of International Settlements (BIS), at the end of 3, the global banking sector's total debt to China fell to $695 billion from 1 trillion and 100 billion US dollars in the 2014 peak.

It is clear that the correlation between RMB and Libor is higher than that between RMB and domestic banks.

Correlation degree.

According to the data compiled by Peng Bo, about 84% of China's external debt balances are denominated in US dollars.

In its July report, Goldman Sachs estimated that 60 billion US dollars outflow in China in the first quarter of this year was to repay debt, resulting in a total outflow of $1 trillion and 600 billion.

Koon HowHeng, senior exchange strategist at Credit Suisse Group's private banking and wealth management business in Singapore, said that as the US dollar Libor upwards, Chinese enterprises had the power to repay us dollar loans earlier, resulting in a further strengthening of the US dollar against the yuan, and Libor continued to rise.