He Zhicheng: The Fed Raised Interest Rates To See Other People's Faces.

In many articles published this year, the author points out that the US dollar index is going to rise, but this year's high point is around 88.75. The US dollar is indeed the United States, but economic globalization and the wave of globalization of financial markets have made the US dollar a lot of factors outside the United States. These problems not only affect the exchange rate of the US dollar, but also affect the mentality of the US monetary policy makers. The US dollar is super strong, who is glad to be sure that it is prepared to take more monetary easing policies in those countries, because they almost have no conditions for loosening money again. Who else is happy, of course, China and Japan, because they can reduce dollar reserves at high prices.

When considering whether the US monetary policy is moderate, the US Federal Reserve has to consider many factors. The first is whether the US economic growth will return to normal and the prospect of inflation. Of course, second, it should also consider the US stock market which tends to form a seesaw relationship with the strength of the US dollar. At present, the US stock market is "high above the horizon". Once the US dollar index has risen sharply due to the expected rise in interest rates, the stock market has collapsed, which is really a loss for the Fed. The third factor must consider whether China and Japan, which hold many US Treasury bonds, will sell large quantities of US dollar reserves, especially China. China has 4 trillion foreign exchange reserves, which are denominated in US dollars. The market expects that over the past years, China has been changing the stock position, reducing the US dollar reserve to below 50%, but if it is still close to 50%, it will also have US $two trillion.

The Chinese government has reiterated that it will invest at least 50 billion dollars for the "one belt and one way" plan in the future. Obviously, the money should be reduced from foreign exchange reserves and which country's foreign exchange reserves should be reduced? Of course, it is the national debt that is appreciating and the rate of appreciation is too fast. Many people say that the dollar will appreciate even against the euro and yen, and that is the right way to hold the dollar. If we say that the dollar will appreciate in the future, but that is unknown. Now selling dollars is a real benefit. What's more, selling American Treasury bonds means buying things. Where to buy things and where to buy things? Of course, the countries and regions with the fastest currency depreciation, because things there are already very cheap. This year, the yen has depreciated by more than 15%, and the euro has fallen by nearly 15%. If you want to buy a lot, it will be a good opportunity.

The author believes that China must reduce foreign exchange reserves, but how much reduction? When will it begin to be reduced? After selling foreign bonds and stocks, where can we buy this money? This is a very important issue. Reducing foreign exchange reserves is China's sovereignty, and where to buy things is China's sovereignty. But safeguarding the security of the US Treasury bond market and safeguarding the security of the US financial market are also the sovereignty of the United States. If the US dollar remains strong in the medium and long term, China can reduce its holdings slightly, but if the dollar rises too fast and the opportunity to pull up shipments, China may sell substantially. This is a financial storm that nobody wants to see.

　　 exchange rate It's a weapon and part of a new big power relationship. Americans are smart. They should guess the Chinese mentality: China can not hold too much foreign exchange reserves, which is one of the key points of the new normal economy. But it is unlikely that China will suddenly reduce its reserves substantially. international market Confusion. In the proposal to reduce foreign exchange reserves, it must be a reduction in holding prices and the best reduction in market stability. But if the US dollar rises too fast, it will induce the Chinese government to accelerate its reduction of US dollar reserves rather than reduce the euro and yen. This is something Americans do not want to see. More importantly, while selling US Treasury bonds, we must import goods as it is impossible to get back to buy Chinese goods. If we consider expanding imports, it must be Japanese goods and European goods that import a lot of depreciation. This result can explain the failure of US monetary policy.

The US government will not act foolishly. The Fed also has to weigh the advantages and disadvantages of the US dollar to control the rise of the US dollar index. In the future, the Fed will look at what action the ECB and the Bank of Japan, including the Bank of England, may take to decide whether to raise interest rates. The so-called control of the rising rhythm of the US dollar index should not only suppress the appreciation of the US dollar behind the US economy, but also ensure the stability of the US stock market, so that foreign governments with large US stocks will not panic and rush to sell.

But now we say that the US dollar index must be substantially callback and inaccurate, but the road is long and the trend is tortuous. I believe that the US dollar index will take the bull, and it will take two or three years, but it must be a slow cow. This year's top area is near 88.75. In the future, it needs to be callback and how to walk slowly.

In November, US dollar index A "small double head" pattern has been formed near 88.2, which is very critical. It is likely to cause the dollar index to return in November. Since the ECB meeting in December is the point of further easing monetary policy, the Federal Reserve will create a stable monetary policy environment in November and wait for further action by the European Central Bank.

From this analysis, the US dollar index will be callback around 86.50 in November, then continue in December, test the top area of this year - 88.75, then fall back, test 88.2 near, only hold in order to open next year and even longer term bull market.