US dollar keeps depreciating affected by the trade war between China and US. Compared with previous trading day, US dollar was down 337 basic point against the RMB to 6.2816 on 27, March.
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Why US dollar is depreciating?
The trade talks between
the United States and China
The trade talks between the United States and China is on-going. China still attempted to avoid the large-scale trade war bursting with US. As a matter of fact, the US trade deficit against China is the key point of the trade talks.
US dollar exchange rate affects the trade surplus and deficit indeed for both countries. Depreciation of US dollar will reduce Chinese export because it means the appreciation of RMB, so other countries have to pay more to buy Chinese commodity. It is effective to exert pressure to Chinese exporting industry in the trade talks.
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Do you know the “Plaza Accord”? Japanese yen was appreciated too much lead to export industry ruined. Some experts think US try to depreciate the US dollar to sign an “New Plaza Accord” with China like Japan.
US dollar index keeps weakening
After the Federal Reserve System raises interest rates, US dollar index keeps weakening. The polices of Trump included the export increases and employment promotion. So there is no doubt that the depreciation of US Dollar benefiting the policies realization. More exports mean more jobs.
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What can we do?
Depreciation of US dollar directly means that the purchasing power down! Purchasing the foreign commodities is at a higher price by US dollar, and the cost of running the company becomes higher. Nevertheless, some ways to make a profit have emerged.
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It is a good time to increase the
proportion of gold in investment
For long time, gold price is settled in US dollar and because of that, the price is negative correlation to US dollar. Now US dollar keeps weakening. In a word, you can use other currency, like RMB, to buy more gold.
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When US dollar is appreciating, people are confident to US dollar and add the US dollar holding by exchanging the gold. On the contrary, when US dollar is depreciating, the time to buy gold comes.
If you stay or live in China,
that is still a good news
The depreciation of US dollar means the appreciation of RMB. The foreign raw material or commodity could be bought at lower price by RMB. Because of the depreciation of US dollar, RMB can exchange more HK dollar. However, it is beneficial for those who run a business in China.
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HK dollar pegged to the US dollar
The depreciation of the US dollar means that the Hong Kong dollar depreciates. It's cheaper for those who want to go shopping or buy house or car in HK. A data, from the Internet, indicated now shopping in HK equal to 20% off compared to the previous year.
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If your properties have affected by this event, time to stop loss.
HACOS,Business Services Solutions Master