The Delta variant virus triggered the return of funds to the U.S. dollar and encouraged the U.S. dollar to rebound. Huw Davies, Director of Global Fixed Income Investment, believes that a strong U.S. dollar may have a restraining effect on global growth prospects. As for whether the world truly recovers, the key lies in whether the U.S. dollar Weakened.
Davis pointed out that the appreciation of the U.S. dollar in March has caused a certain degree of tension in the global financial market. It is frankly that the weakening of the U.S. dollar is one of the key elements of the global recovery, which needs to be seen in this wave of recovery.
Davis said that the rise in short-term real interest rates has also led to the appreciation of the U.S. dollar and may lead to the flow of funds into U.S. assets. This will not be conducive to the growth of other parts of the world during this period, especially emerging markets with large dollar liabilities, which is very important for the recovery. For most economies, the difficulty of obtaining capital injection has increased significantly.
In other words, the appreciation of the U.S. dollar makes it difficult for emerging markets that are recovering to obtain financial support and support economic growth. Therefore, the key to global economic recovery is to see when the U.S. dollar has continued to depreciate since the peak of the epidemic. This is conducive to global recovery. The current U.S. dollar rebound is obviously Not conducive to global recovery.
Davis believes that the next need to pay special attention to short-day real interest rates, to observe whether the possible appreciation of the US dollar will cause any rise in tension.
In addition, whether the Federal Reserve has started to reduce the scale of debt purchases. Judging from the current situation, the Federal Reserve still needs to support the economy and therefore needs to keep real interest rates at a low level. It is expected that the Federal Reserve will cautiously reduce the scale of debt purchases. , As to repeat the situation of the rapid exit of quantitative easing in 2013, which led to a sharp rise in interest rates.