US Dollar Reached Record High

On this Monday, we have analyzed the future trend of US dollars on our Wechat public account “Chinatungsten Online” and made some suggestions for the tungsten and molybdenum industry in China.

Last week, the plunge of Turkish currency came with the devaluation of the euro, the pound and other major currencies against dollar. The dollar index broke through the consolidation and reached more than 96. China Tungsten Online has given you some suggestions based on our experience in this industry for more than 20 years. A lot of examples have been listed in the previous news. For example, we analyze the profit of iPhone under the influence of RMB devaluation. We hope that everyone can seize the opportunity in the volatility of international trade and finance, and strive for the most positive results. We should take advantage of the situation. Any misjudgment and wrong operation will lead to great losses. (For details, see the historical information on Wechat public account “Chinatungsten Online”.)

Sino-US trade conflict

On the morning of Aug. 15th, EST, the U.S. dollar index continued to surge and exceeded 97. It is the highest level since 2017. After the exchange rate of RMB against US dollars broke through 6.92 yesterday, some people who are still in a state of shock may be shocked again! 

The result has already been predicted by Chinatungsten Online correctly.

What’s worse, the US dollar index does not only reflect people's general panic, but also tells everyone the comeback of strong dollar. Global stock markets, foreign exchange markets, bond markets, Western developed countries and emerging nations are hard to escape from its influence. With the rippling effect, we believe that even the main operator, the US President Trump team can hardly predict what unpredictable changes will occur in the global political and economic landscape in the future!

Let's take a look at the main data of the global market, stock market and forward market.

The dollar is so strong that almost all the world's currencies against the dollar will depreciate. The ability to resist the pressure and depreciation varies with the economic situations of different countries. However, there is no doubt that, in line with Trump's expectations of “America First”, only US dollar is soaring when other countries’ currencies are depreciating.

As US GDP rebounds rapidly, the Fed continues to raise interest rates. The dollar index is hard to return to the previous 94 in a short period of time when other countries maintain low interest rates or lower interest rates.

Similar to the foreign exchange market and interest rates, US stocks Dow Jones Industrial Average dived at the opening. It was below 25,000 and dropped 300 points. The Nasdaq index also fell 1.7%. Technology stocks, Amazon, Apple, Microsoft, Facebook, Chinese concept stock and so on fell across the board. Pingduoduo drops below the offering price. 

The implications of the increase of US dollar index on RMB are described by Chinatungsten Online as follows:

“If the dollar index exceeds 97 in the future, the RMB exchange rate against the dollars will go up to 6.9. It is even possible for RMB exchange rate to reach 7.0 in the short term. As the BPOC has increased the liquidity, it has increased the currency investment of 1.47 trillion in the past three months. Meanwhile, RMB deposit and loan interest rate decreases appropriately. Therefore, it can be expected that CPI will remain high. We can conclude that the RMB exchange rate against the US dollars will still devalue without the rippling effect of Turkish lira plunge.”

Based on these analyses, we have given some suggestions to friends in the tungsten and molybdenum industry. Today we are willing to reiterate these suggestions:

1) Before there is a sign of cease-fire, it is beneficial to hold the US dollar as much as possible and not to dispose of the US dollar if the RMB does not reach 7.00 in order to earn more exchange earnings.

2) To reduce the price for American market. If we give up a part of the exchange earnings to US importers, it can help us maintain bilateral trade relations.

3) Assume that the import amount of tungsten product is set within a certain period of time, they should encourage giving certain concessions as much as possible in order to exchange for more US dollars in the case of depreciation of the RMB and obtain more exchange earnings.

4) Try to use dollar-denominated pricing instead of the euro and other pricing methods. Other currencies against the dollar have different ranges of depreciation.

Thrice repeated, to emphasize. 

7.0

PAY ATTENTION TO 7.0!!! PAY ATTENTION TO 7.0!!! PAY ATTENTION TO 7.0!!!

This is the important index for holding or selling the dollars. You will see it soon.

Moreover, if Trump is so “busy” that he has no time to discuss with China about the exchange rate and the US dollar index is up to 100, we will see 7.30 or even 7.50 soon.

100

Don’t doubt Trump’s strong dollar policy. Don’t doubt that US dollar index will be up to 100.

If the US dollar index is up to 100, a lot of countries will unavoidably suffer from the financial crisis like the crisis in 1998 and 2008 because the two crises both happened when the US dollar index was up to 100.

Cash is king

Special moments require special thoughts and strategies. If this happens, the best thing you can do is to hold more cash. The more the better! The more foreign currency you hold, the better. This is what we should do when the two high probability events happen.