In August, the U.S. dollar index fell 1.25%. At this point, the U.S. dollar index has fallen for four consecutive months.
Wall Street analysts pointed out that based on historical data, the U.S. dollar is likely to usher in a recession in the past ten years. What is causing the weakening of the U.S. dollar and what impact will it have?
This is to track the changes in the exchange rate of the US dollar against a basket of currencies The trend of the U.S. dollar index since the beginning of this year. It can be seen very intuitively from the figure that in March this year, due to the outbreak of the epidemic, the US dollar briefly acted as a “safe haven”. After a strong rise, it soon began to weaken. In recent months, the downward trend has become further significant.
Since March this year, the U.S. dollar index has accumulated It has fallen 10% and is currently at its lowest level in more than two years. There are many reasons for the weakness of the U.S. dollar. As the epidemic broke out in the United States and gradually worsened, the U.S. economic outlook turned dark; at the same time, the U.S. government launched a large stimulus plan, which directly pushed the federal government’s budget deficit to an extremely high level; in In its latest recent statement, the Federal Reserve further pledged to maintain interest rates at zero, which further strengthened market expectations that the U.S. dollar will continue to weaken.
Ray Atrill, head of foreign exchange strategy at the National Australia Bank: I think that due to the significant decline in real interest rates, a weakening trend in the U.S. dollar has taken shape. According to our forecast, in Over the next two years, we will continue to see the U.S. Dollar Index fall by at least another 10%.
Credit Suisse strategists believe that the U.S. dollar may experience a longer-term downward trend. In a report released recently, they pointed out that historically, the U.S. dollar Bear markets typically last 9 to 10 years.
Generally speaking, a weak dollar is good for U.S. exports and the stock market, but it will increase commodity prices and import costs. It is a double-edged sword and will also have many knock-on effects on international trade and global finance. Therefore, how other central banks will respond next is a major concern for the market, especially the outcome of the upcoming European Central Bank meeting on September 10.
In general, the trend of the U.S. dollar still depends to a greater extent on monetary policy. As long as the Fed’s stance does not change significantly and U.S. interest rates continue to remain low, it will be difficult to reverse the weakening trend of the U.S. dollar in the short term. A weak U.S. dollar may have a certain impact on the U.S. dollar’s reserve status, but analysts believe that this impact will not be too great.
International Monetary Fund (IMF) data display , the U.S. dollar’s share of global reserves was approximately 62% in the first quarter of this year. Although there was a significant decline from 64.7% in the first quarter of 2017, it was higher than 60.9% in the fourth quarter of last year.
Rare in history! Will U.S. government debt exceed GDP? The last time was 1946…
Data released by the U.S. Department of Labor on the 3rd showed that in the week ending August 29, the number of people applying for unemployment benefits for the first time was 881,000, which was 881,000 more than before. It decreased by 130,000 in a week and fell back to within the 1 million mark again. However, analysts believe that this data change is related to the change in statistical methods by the U.S. Department of Labor, and that there is still a long way to go for U.S. employment recovery in the future.
The U.S. Department of Labor said the new adjustment method will be based on addition rather than multiplication, which is expected to narrow the gap between actual and reported headcount and is intended to reassess seasonal fluctuations in employment. , to solve the problem of overestimation of data. After adjustments to statistical methods, the latest data on first-time jobless claims was better than expected, but still four times the pre-pandemic average. The data also shows that the four-week average number of people applying for unemployment benefits is as high as 990,000, and the number of people continuing to apply for unemployment benefits is as high as 13.25 million, which is still high.
On the other hand, due to the new coronavirus Epidemic and related blockade measures, the United States new in AugustThe number of additional layoffs increased by 116,000, bringing the total number of layoffs in 2020 to 1,963,458, breaking the record for layoffs in the same period in 2001. Analysts believe that the labor market may not be able to achieve a full recovery in the short term.
Professor Phelps of Columbia University: I think some industries will never recover and COVID-19 has just pushed them off a cliff, but they were already very powerless and vulnerable.
In addition, the U.S. Congressional Budget Office released a report on the 2nd local time stating that due to the increase in government spending and decline in revenue due to the COVID-19 epidemic, in fiscal year 2020 The U.S. federal budget deficit will reach $3.3 trillion, and the federal government debt is expected to account for 98% of the U.S. gross domestic product and will exceed its gross domestic product in fiscal year 2021. The last time this happened was in 1946 .
Can’t even a large company with assets of over US$1 billion survive? 45 large US companies filed for bankruptcy! A record number…
Affected by the new crown pneumonia epidemic, the difficult situation faced by American companies has become worse. Data shows that bankruptcy filings by large American companies are increasing at a record rate and will exceed the 2009 financial crisis. levels reached during the crisis.
Data provided by the bankruptcy data website affiliated with New Generation Research Company shows that as of August 17, a record 45 companies, each with assets exceeding US$1 billion, have Filing for Chapter 11 bankruptcy is a common way for financially distressed businesses to restructure themselves. At the same time in 2009, when the financial crisis was at its deepest, there were 38 such companies. At the same time last year, there were 18 such companies, less than half of today’s number.
The data also shows that a total of 157 companies with liabilities of more than US$50 million have filed for bankruptcy this year. . Large amounts of corporate defaults have occurred, led by oil and gas companies, as low oil prices have caused serious damage to many companies.
33 energy companies have filed for bankruptcy so far this year, including Whiting Petroleum Company and Diamond Offshore Drilling Company. Last year, only 14 energy companies filed for bankruptcy. Retail companies with assets of more than $50 million have also been severely affected, with 24 companies having filed for bankruptcy, which is three times the number in 2019.
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