A Brief Analysis of the Currency Characteristics of Major Currencies in the Foreign Exchange Market
1. USD:
The U.S. dollar is the global hard currency, and the main currency reserves of central banks of various countries are determined by the political and economic status of the United States.
At the same time, the United States also serves its own interests by manipulating the exchange rate of the US dollar, sometimes at the expense of the interests of other countries. The words and deeds of the United States have a great impact on the foreign exchange market. Therefore, it is very important to consider the attitude of the United States towards the exchange rate of the US dollar from the perspective of the United States’ own interests to grasp the exchange rate trend.
For example, what is far behind is the “Plaza Agreement” in 1985. At that time, the United States faced a record-breaking trade deficit caused by the excessive exchange rate of the U.S. dollar, while Japan invested and held a large amount of U.S. dollar assets. The United States exerted pressure. On the same day in September 1985, Germany, France, and the United Kingdom reached an agreement among five countries to jointly intervene in the market. Countries sold the U.S. dollar, causing the U.S. dollar to fall in an orderly manner to solve the huge U.S. trade deficit. In the end, the U.S. dollar continued to depreciate sharply, and the U.S. dollar depreciated by 50% against the Japanese yen in less than three years. Japanese investors who held U.S. dollar assets suffered heavy losses, and the sharp rise in the yen exchange rate eventually pushed the Japanese economy into a recession that lasted for more than ten years. Japan’s challenge to the United States’ world economic hegemony also suffered a crushing defeat.
The closest thing is that after October 2004, the US dollar fell sharply, and the euro hit a record high of 1.3670. During this period, the European side has repeatedly called on the United States to intervene in the exchange rate in order to avoid the setback of the euro zone’s economic growth caused by the high exchange rate of the euro. However, the United States only verbally stated that it insists on a strong U.S. dollar policy, but is unwilling to intervene in the market jointly, because the depreciation of the U.S. dollar is beneficial to the U.S. in easing its trade deficit. As a result, the market became more confident in shorting the U.S. dollar, and the U.S. dollar fell sharply before the end of the year without turning back.
From the above two examples, we can see how important it is for investors to understand the real intention of the United States on the exchange rate trend.
The domestic financial capital market in the United States is well developed and closely related to markets around the world, and domestic markets are also closely related. Because funds can flow between the foreign exchange market, the stock market, and the bond market at any time for the purpose of profit, and can also flow from domestic to foreign countries at any time, the significant impact of this flow of funds on the foreign exchange market is self-evident. For example, the rise and fall of the yield of U.S. Treasury bonds has a great impact on the U.S. dollar exchange rate, especially when the foreign exchange market focuses on the prospect of U.S. interest rates. Because treasury bonds are sensitive to changes in interest rates, changes in investors’ expectations for interest rate prospects are keenly reflected in the bond market. If the yield of government bonds rises, it will attract capital inflows, and the inflow of funds will support the rise of the exchange rate, and vice versa. Therefore, investors can judge the market’s expectations of interest rate prospects from the rise and fall of government bond yields, so as to make decisions on foreign exchange market investment.
2. EUR:
The euro accounts for 57.6% of the U.S. dollar index, the largest proportion. Therefore, the euro can basically be regarded as the counterpart currency of the U.S. dollar. Investors can refer to the euro to judge the strength of the U.S. dollar. The proportion of the euro is also reflected in its currency characteristics and trends. Because of its large proportion and trading volume, the euro is the most stable currency among major non-US currencies. Like large-cap stocks in the stock market, it often drives European currencies and other non-US currencies. Currency plays a leading role. Therefore, it is quite advantageous for beginners to choose the euro as the main operating currency.
At the same time, because the euro has only been on the market for a few years, the historical trend is quite in line with technical analysis, and the trend is stable, the transaction volume is large, it is not easy to be manipulated, and there are few human factors. Therefore, only from the perspective of technical analysis, the long-term trend Grasp is more effective. Except for some special market conditions and trading periods (such as the end of 2004, the euro made a breakthrough to a new record high under the holiday atmosphere of Christmas and New Year’s Day and the transaction was light. The follow-up market showed that this was a false breakthrough, which was the cunning of the main force in some markets. means), generally speaking, the reliability of breakthroughs in important points, trend lines and patterns is relatively strong.
Both the government and the central bank of a country will intervene in the currency in line with their interests and intentions. The difference lies in their respective capabilities. As mentioned above, the United States has a strong ability to intervene in the currency due to its national strength and influence, as well as its political structure. It can be said that, basically, the long-term trend of the U.S. dollar can follow the intention of the United States, while the political structure of the euro zone Relatively scattered, there are more differences in interests, and there are correspondingly more differences in opinions. Therefore, the ability of the EU to influence the exchange rate of the euro is also greatly reduced, and it cannot be compared with the United States at all. When there is a game between Europe and the United States on the exchange rate due to differences in interests, there is no doubt that the United States has the upper hand. As mentioned earlier, during the rise of the euro in 2004, the EU’s verbal intervention could only have an impact on the short-term trend of the euro, and there was no actual intervention in the market, because the European side knew that without the cooperation of the US side, the effect would not be satisfactory. .
3. Yen:
Because Japan’s domestic market is small, it is an export-oriented economy, especially in the past ten years of economic recession, and exports have become the life-saving straw for domestic economic growth. Therefore, regular intervention in the foreign exchange market will prevent the exchange rate of the yen from being too strong and maintain the competition of export products. Force has become Japan’s habitual foreign exchange policy. The Bank of Japan is the central bank that most often intervenes in the exchange rate in the world, and Japan’s foreign exchange reserves are the largest in the world, and its ability to intervene in the foreign exchange market is relatively strong. Therefore, for foreign exchange market investors, it is of course necessary to pay attention to the Bank of Japan. Japan’s means of intervening in the foreign exchange market are mainly verbal intervention and direct market entry. Therefore, the frequent remarks of the Bank of Japan and the Ministry of Finance officials have a great impact on the short-term fluctuations of the yen, which is what short-term investors need to focus on, and it is also the difficulty of short-term operation of the yen.
It is also because the Japanese economy is closely related to the world economy, especially to important trading partners such as the United States, China, and Southeast Asia. Therefore, the exchange rate of the yen is also more susceptible to external factors. For example, the growth of China’s economy is increasingly important to the recovery of Japan’s economy, so news of China’s economic slowdown has an increasingly negative impact on the yen exchange rate.
Although Japan is a big economic country, it is a political puppet. It can be said that it is the little buddy of the United States, and the United States is the only leader. Therefore, from the perspective of exchange rate policy, it basically needs to conform to the wishes and interests of the United States. For example, the “Plaza Agreement” in 1985 was the result of being politically weak and controlled by others. Therefore, the intervening exchange rate mentioned above can only be tossed within the framework of “limitation” by the Americans.
The rise in oil prices is negative for the Japanese yen. Although Japan’s appetite for oil has been decreasing, it still remains psychologically.
4. GBP:
The pound was once the world currency, but it is currently the most valuable currency. Because of its high exchange rate against the U.S. dollar, the daily fluctuations are relatively large, especially its trading volume is far less than that of the euro, so its currency characteristics are reflected in volatility Strong, and as the earliest foreign exchange trading center in London, the skills and experience of its traders are top-notch, and these trading skills have been well reflected in the trend of the pound. Therefore, the pound is relatively There are many human factors, especially short-term fluctuations, and the “deception” of those traders to less experienced investors can be described as “time-tested”. Therefore, short-term manipulation of the pound is the touchstone to test the skills of investors, and those investors who lack experience and skills, it is best to stay away from the pound. yunshfx
The pound is a European currency and is closely linked to the euro. Because the UK is closely related to the economy and politics of the Eurozone, and the UK is one of the important members of the EU. Therefore, the economic and political changes in the EU have a great impact on the pound. For example, the recent French and Dutch referendum against the adoption of the EU constitution caused political turmoil, and the euro fell sharply, which dragged down the pound.
In addition, the discovery of oil in the North Sea made the United Kingdom one of the few countries in the G7 that is self-sufficient in oil. The rise in oil prices has also benefited the pound to a certain extent. Compared with the yen, the cross between the pound and the yen has a better performance. yunshfx
5. CHF:
Switzerland is a traditional neutral country, and the Swiss franc is also a traditional safe-haven currency. During periods of political turmoil, it can attract safe-haven capital inflows. In addition, the Swiss constitution stipulates that every Swiss franc must be backed by 40% of gold reserves. has expired, but the Swiss franc still has a certain psychological connection with the price of gold. The rise in the price of gold can lead to a rise in the Swiss franc to a certain extent.
Switzerland is a small country. Therefore, external factors determine the exchange rate of the Swiss franc, mainly the exchange rate of the US dollar. In addition, because it is also a European currency, it usually follows the trend of the euro.Yun Shang Hui Xin
The currency volume of the Swiss franc is small, and in special periods, especially when political turmoil triggers a large demand for it, it can quickly push up its exchange rate and easily overestimate its currency value.
6. Australian dollar:
The Australian dollar is a typical commodity currency (commodity currency is characterized by high interest rates, a high proportion of exports to GDP, a major producer and exporter of an important primary product, currency exchange rates and certain commodities (or gold prices) Changes in the same direction, etc.), Australia has an absolute advantage in the international trade of coal, iron ore, copper, aluminum, wool and other industrial products and cotton textiles, so the rise in the prices of these commodities has a great positive impact on the Australian dollar Yes, in addition, although Australia is not an important producer and exporter of gold, the positive correlation between the Australian dollar and gold prices is more obvious, as well as oil prices. For example, in recent years, the international commodity futures price index representing the world’s major commodity prices has been rising all the way, especially in 2004, the prices of gold and oil rose sharply, which pushed up the exchange rate of the Australian dollar all the way.
In addition, the Australian dollar is a high-interest currency, and changes in the US interest rate outlook and treasury bond yields that reflect the interest rate outlook have a greater impact on it.
7. Canadian dollar:
The Canadian dollar is also a commodity currency. It is the most export-dependent country among the seven Western countries. Its exports account for 40% of its GDP, and its export products are mainly agricultural products and seafood.
At the same time, the Canadian dollar is a very typical currency of the U.S. dollar group (the U.S. dollar group refers to those countries that have a very close relationship with the U.S. economy, which mainly includes countries that implement free trade areas or sign free trade agreements with the United States, such as Canada, Latin American countries and Australia are the main representatives), 80% of its exports are to the United States, and its economic dependence with the United States is extremely high.
In terms of exchange rates, the movements of the Canadian dollar against the major currencies and the U.S. dollar against the major currencies are basically the same. For example, the euro against the Canadian dollar and the euro against the U.S. dollar maintain a good same direction in graphs, but in recent years, the dollar has generally fallen. The connection is slowly weakening.Yun Shang Hui Xin Limited
In addition, Canada is the only oil-exporting country among the seven Western countries, so the rise in oil prices is a great benefit to the Canadian dollar, which makes it perform well in the cross trading against the Japanese yen.
