Change the dollar in 2016, take care of the wrong rhythm

Since the renminbi is in the channel of falling interest rates, in addition to buying gold, investors can also buy treasury bonds and other investment types that can lock in long-term gains. The real investment opportunity will be born in the people's marketed Chinese market, not the US market in the context of austerity. Last year, the RMB depreciated against the US dollar (middle price) by 5.87%, and the annual foreign exchange reserve decreased by 512.7 billion US dollars, the first decline since 1992. Although the reduction of foreign exchange reserves is based on a variety of reasons, the nominal decline of more than 500 billion US dollars really surprised the market, what is the concept of 512.7 billion US dollars, the current world foreign exchange reserves of more than 500 billion US dollars, including China, only five One.
In 2016, the depreciation of the RMB against the US dollar was more pronounced. The RMB exchange rate against the US dollar fell more than 1.5% in less than ten days. In particular, the December economic data just released shows that foreign exchange reserves in December decreased by 107.9 billion US dollars, a new high. Regardless of the actual data on the depreciation of the renminbi against the US dollar or the expected impact of a sharp decline in foreign exchange reserves, Chinese people’s worries about the depreciation of the renminbi have intensified, and “changing the dollar” seems to have aroused the herd effect.
Different from the fact that China’s aunt bought gold in 2013 in order to obtain “value-added” income, the current demand for “dollar” is basically for the purpose of “preservation”. If it is for the purpose of “preserving value”, the risk can be withstood. Very low. In fact, this "preservation" demand for the US dollar is more due to the lack of understanding of the "depreciation" of the renminbi.
The foreign exchange market is very different from the commodity market. Foreign exchange is a relative value. The appreciation or depreciation of the renminbi depends not only on the trend of the US dollar exchange rate, but also on the actual purchasing power of a basket of currencies. If the renminbi can buy more euros, pounds, yen, etc., the decline in the exchange rate of the US dollar will not actually affect the value of the renminbi. The global purchasing power of the renminbi in the hands of ordinary people has not been affected.
Compared with the Russian ruble, the Argentine peso, the South African Rand, the Brazilian Real, etc., the renminbi-denominated domestic prices are still very stable and have not risen due to the depreciation of the renminbi against the US dollar. In the last two years of the depreciation of the renminbi against the US dollar, the real effective exchange rate of the renminbi rose by 6% and 2.79% in 2014 and 2015 respectively. The purchasing power of the renminbi is still rising, not falling, relative to the global basket of currencies.
Regarding the question of whether the exchange of dollars can really offset the risk of RMB depreciation, we must first understand the two prerequisites for the depreciation of the RMB. First, prices denominated in RMB are in the rising range. Second, the cost of going abroad for tourism, shopping, investment, and schooling has increased significantly. Regarding the first one, at present, China’s price index is not high. The CPI was 1.6% last month. According to the bank’s interest rate hike data, the minimum interest rate for most banks’ one-year deposits is over 1.8%, not to mention. There are many stable financial management varieties, and it is not a big problem to hold the RMB out of inflation. Regarding the second, if your destination for shopping, tourism, investment, and schooling is not in the US market, but in Europe or other countries, the current holdings of the people still have an advantage.
According to the size of China's foreign exchange reserves at this time, as well as the overall economic volume, there is no basis for the RMB exchange rate against the US dollar to depreciate sharply. Moreover, since 2008, the US dollar index has risen by more than 40%. For a sovereign credit currency, This means that there is a greater depreciation in many of the currencies corresponding to it. Before the currencies such as the Euro, the Japanese Yen and the British Pound have no major credit risk, there is not much room for the US dollar to continue to soar.
On the other hand, the current RMB exchange rate is no longer more than a decade. It is closely related to the exchange rate of the US dollar, considering that if the RMB continues to keep a close eye on the US dollar, the Fed tightens the currency, and the subsequent interest rate hikes will give the RMB real effective exchange rate. The greater passive appreciation and the suppression of the current apparent capital outflow, the RMB decoupling from the middle price reform last year, led to a very significant depreciation of the RMB against the US dollar in the past two months.
Another data is that since March last year, the United States has not only accelerated the tightening of the currency, but also initiated interest rate hikes. However, the US dollar index has not continued to rise, but has remained within 100. The real appreciation of the US dollar was a significant appreciation of 25% from May 2014 to early March 2015. If you simply go to the dollar, investors may have missed the best time and risk the wrong pace.
On the other hand, if you want to invest in dollar assets, you should know that in the context of the dollar tightening, the US Dow Jones index fell 2.3% last year, the worst annual performance since 2008, and the US bond market fluctuated. High-yield bond risk is close to the 2008 financial crisis. In other words, simply holding the US dollar is not risk-free arbitrage. Even if there is income, it will not be too big. Participating in the US capital market is actually more risky, and it is not ordinary investors who can participate casually. In fact, the exchange of dollars is more speculative exchange rate.
If it is only to avoid exchange rate risks, there is no need to hang on a dollar tree. As global stock market turmoil intensified and the RMB exchange rate against the US dollar fell significantly, the price of gold denominated in RMB rose sharply. Since last month, the price of gold denominated in RMB has risen from 215 yuan per gram to 233 yuan per gram, an increase of more than 8%. As a non-credit asset with strong financial currency attributes, with the impact of US interest rate hikes on global stocks and bonds, the safe-haven funds flowing into the gold market began to increase. The world's largest ETF professional gold investment fund SPDR Net increase in the past month has exceeded 20 tons.
Compared with stocks, bonds and the US dollar in high positions, gold has undergone more than four years of adjustment, speculative demand has been basically exhausted, and demand supported by physical consumption has become more stable (World Gold Council announced third quarter of 2015) According to the “Gold Demand Trend Report”, global gold demand reached 1,121 metric tons this quarter, up 8% year-on-year, while financial market gold as a strategic asset for central banks [microblogging] to balance foreign exchange reserves, the central bank’s net purchases In the last three quarters of last year, central banks bought a net gold of 425.8 tons. As shown in the figure, in 2015, the price of gold denominated in 17 major currencies in the world, the price of gold denominated in 10 currencies is rising, and the price of gold denominated in only 7 currencies is falling. As can be seen from the figure, the greater the decline in the US dollar exchange rate, the greater the price increase of the gold price.
As one of the investment products that hedges the risk of RMB exchange rate against the US dollar, gold has the advantage of being more flexible, not subject to policy control, and can also hedge the credit risk brought by the stock market and foreign exchange market. When the Chinese people were busy changing dollars, many people in the United States increased their investment demand for gold. According to the World Gold Council, in the third quarter of last year, demand for gold bars and coins in the US market rose by 207% to five years. new highs.
Since the renminbi is in the channel of falling interest rates, in addition to buying gold, investors can also buy treasury bonds and other investment types that can lock in long-term gains. The real investment opportunity will be born in the Chinese market where the people are pricing, rather than the US market with the background of austerity. If this logic is wrong, it is a matter of time before the wrong rhythm. Simply holding the US dollar can only be said to give yourself some psychological comfort. Simply put, if holding the US dollar is a better way to preserve the value of the investment, the savings rate of the American population, which is much higher than China's income, is not so low.
Whether the US dollar is in the stage of depreciation or appreciation, it is not cost-effective to simply hold the US dollar. As an endorsement of US dollar credit, US Treasury bonds have an amazing growth rate. Since Obama took office, the US government’s debt has doubled, and the US dollar has not continued to strengthen. The foundation is also very affordable, and the Fed’s recent interest rate hikes have ended in the domestic capital market crisis (the 1999-2000 rate hike pierced the Nasdaq [microblogging] bubble; 2004 The interest rate hike from 2006 to 2006 finally ignited the subprime mortgage crisis). In a word, in 2016, the US dollar was carefully taken care of. (The author of this article: Finance columnist Xiao Lei)

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