In the global financial market, the United States has always been a currency hegemon, using the international status of the dollar to exert pressure on other countries and even launch currency wars to achieve its goals. However, recently, the renminbi has shown strong strength and launched an effective counterattack against the dollar. Since the beginning of November 2023, the exchange rate of the RMB against the US dollar has continued to rise**, and as of December 10, it has risen by 1,961 points, the largest increase in nearly a decade. This not only reflects the stability and resilience of China's economy, but also shows the increasing status and influence of the RMB in the international monetary system.
Needless to say, the military power of the United States should not be underestimated, and its financial power should not be underestimated. The United States uses the advantages of its US dollar as an international reserve currency and settlement currency to manipulate and influence the global economy through various financial instruments and mechanisms. It can not only pass on its own debt and inflation risks by issuing US dollars, but also obtain huge economic benefits from other countries and regions through sanctions, financial crises, and manipulation of exchange rates and interest rates.
The Latin American crisis, the Southeast Asian crisis, and Japan's prolonged recession are all clear evidence of US financial hegemony. The U.S. financial machine is a double-edged sword, both in terms of short-term benefits and long-term risks.
The aggressiveness of the dollar, the mourning of global currencies. This is the result of a brutal currency war waged by the United States since last year.
The United States has taken advantage of its hegemonic position in the global financial system to continuously raise interest rates, ** the dollar in the market, causing the shortage and appreciation of the dollar, while other currencies are facing tremendous depreciation pressure.
In 2022, major currencies such as the euro, the yen, and the yuan have all been hit hard and depreciated respectively. 5% and 41%。Some institutions even predict that the renminbi will fall below the psychological threshold of 8 yuan, showing a loss of confidence in the renminbi.
The U.S. goal is obvious: to undermine the credibility and competitiveness of other currencies, while at the same time enhancing the dollar's standing and influence, so as to continue to extract profits around the world.
For the renminbi, this is a life-and-death challenge. If the renminbi continues to depreciate, it will cause more countries and regions to abandon the use and reserve of renminbi, weaken the internationalization process of renminbi, and even affect China's economic stability and development. This is exactly what the United States wants to see, and it is what we must guard against.
The dollar is not having a good time either, and the Fed's interest rate hike policy has lost its effect. The U.S. dollar index jumped from 103 at the start of the year82 points fell to the current 8923 points, a drop of 14%. This means that the purchasing power of the dollar has been greatly reduced, and both U.S. imports and overseas travel have become more expensive.
Why is the dollar so weak?
The reason for this lies in the Fed's interest rate hike policy. In order to curb inflation and stimulate economic growth, the Federal Reserve has reduced the federal ** interest rate from 0 since 201925%-0.50% increased to 525%-5.50%, a total of 10 rate hikes. It stands to reason that the interest rate hike will attract more capital into the United States, which will push up the dollar exchange rate. But this is not the case, and the dollar is starting to ** instead.
This is because the *** of interest rate hikes is also starting to show. Interest rate hikes will increase the cost of borrowing in the United States, which will dampen corporate investment and consumer spending, leading to slower economic growth. The interest rate hike will also increase the debt burden of the United States, which will affect the credit rating and fiscal position of the United States, causing concern in the market.
The rate hike would also lead to a widening of interest rate differentials between the United States and other countries, triggering capital outflows and financial crises that would weaken the dollar. Interest rate hikes have already put a lot of pressure on the United States, and the dollar can no longer afford more rate hikes.
The renminbi, on the other hand, has not been affected by interest rate hikes and has benefited from China's economic stability. China's economic growth rate has remained above 6 percent, much higher than the 2 percent or so in the United States. China's inflation rate has also remained below 3 percent, well below the U.S. of about 5 percent. China's debt level has also remained manageable, well below the 130 percent or so of the United States. China's surplus has also remained high, much higher than the deficit of the United States. China's opening-up policy has also been deepening, expanding market access, lowering tariff barriers, optimizing the business environment, attracting foreign capital inflows, and enhancing the internationalization of the renminbi. Therefore, the renminbi has the conditions for strong appreciation, and the renminbi is ready to launch the currency**.
Whether the Fed will continue to tighten monetary policy is the focus of global financial markets. If the Fed sticks to raising interest rates, it will be harder for U.S. officially-issued bonds to sell, as investors will demand higher returns to compensate for rising inflation and risk. As a result, the liquidity of US bonds decreases, that is, it becomes more difficult to buy and sell bonds, and ** becomes more volatile. Concerns about the outlook and stability of the U.S. economy will also increase, leading to further increases in bond rates.
And high interest rates are tantamount to adding insult to injury for the US finances. The United States is already saddled with huge debts and pays hundreds of billions of dollars in interest every year. If interest rates continue**, the official debt burden of the United States will be even heavier, and it may even trigger a fiscal crisis.
The renminbi's international status has been improving in recent years, and recently it has made a major breakthrough: it has surpassed the euro to become the world's second largest financing currency after the US dollar. This means that more and more countries and businesses are choosing to settle their inflows and exits in RMB, rather than the traditional US dollar or euro. This is a huge benefit to China's economic development and opening up to the outside world, and also provides more opportunities and space for the internationalization of the RMB.
The enhancement of the renminbi's financing status also reflects the growth of the renminbi's share of global payments. According to the Bank for International Settlements, in the third quarter of 2023, the renminbi's share of global payments reached 29%, an increase of 03%, a record high. This shows that the renminbi has not only received more recognition and use in the most advanced fields, but also shown stronger attractiveness and competitiveness in other fields, such as investment, finance, tourism, etc.
With the steady recovery of China's economy and the gradual recovery of the global economy, the demand and confidence in the RMB will be further strengthened. It is expected that by 2024, the RMB will continue to maintain an upward trend, and the exchange rate against the US dollar and other major currencies will increase. This will be conducive to China's export competitiveness and will also attract more foreign investment into the Chinese market. The internationalization of the renminbi will usher in broader prospects.