Will the US dollar continue to appreciate against the RMB?

Given that exchange rates are often influenced by fashion and momentum models, the initial reaction of a series of presidential tweets may become a self-sustaining trend.

Still, Fels said, we believe that the dollar may appreciate further in the coming months. Analysts believe that this is probably the last thing Trump wants to see.

Pacific Investment Management has listed the following reasons to support its views:

First, unlike the beginning of 2017, the comments made by President Trump and US Treasury Secretary Steven Mnuchin pushed down the dollar, and the dollar does not seem to be too strong at the moment.

Despite a 6% appreciation since the February 2018 low, the US dollar index (DXY) is still 8% lower than the December 2016 peak.

Second, economic growth is different. The depreciation of the US dollar last year was mainly due to the growth of the rest of the world in catching up with the United States. This year, due to fiscal stimulus policies, the United States may maintain strong growth. At the same time, the Chinese economy began to slow down. After the euro zone's economic growth slowed sharply in the first half of this year, there were only initial signs of temporary stabilization.

Third, the Fed may not be intimidated by the US President’s comments and will continue to tighten monetary policy in accordance with the “lattice map”.

The independence of the Fed can only be abolished by the Congressional Act. This dramatic development may not receive the majority support, and Fed Chairman Powell and the Federal Open Market Committee (FOMC) will try to avoid any complaints that ostensibly succumb to the White House.

As a result, the spread between the United States and other advanced economies may expand further, providing support for the dollar.

Fourth, China is likely to continue to relax its liquidity, which means that the exchange rate of the RMB against the US dollar will further decline.

Finally, the threat of US tariffs on $200 billion in goods imported from China and the 25% tariff on all imported cars and parts are real and may lead to more financial markets in the coming weeks and months. More fluctuating.

Trade tensions can trigger volatility and risk aversion, supporting US assets, including the US dollar.

Moreover, although there is no winner in a comprehensive trade war, the United States will lose less than a country with a large trade surplus, which should also support the dollar.

Therefore, although Trump's inclusion of the Fed in his target opponent list may trigger a downward trend in the US dollar exchange rate, a strong offsetting trend suggests that the more likely outcome is that the US dollar will appreciate further during the rest of the year.