Basic factors affecting national currency
Basic factors affecting the dollar
Federal Reserve Bank (Fed): The Federal Reserve Bank of the United States, referred to as the Federal Reserve, formulates monetary policy completely independently from the Central Bank of the United States to ensure maximum inflation-free economic growth. The main policy indicators of the Federal Reserve include: open market operation, discount rate and federal funds rate.
Federal Open Market Committee (FOMC): The Federal Open Market Committee is mainly responsible for formulating monetary policy, including making eight announcements on key interest rate adjustments every year. FOMC*** has 65,438+02 members, namely, 7 government officials, the governor of the Federal Reserve Bank of New York, and 4 members elected from other governors of 65,438+065,438+0 local federal reserve banks for a term of one year.
Interest rate: the interest rate, that is, the federal funds rate, is the most important interest rate indicator, and it is also the overnight lending rate for mutual loans between savings institutions. When the Fed wants to send a clear monetary policy signal to the market, it will announce a new interest rate level. Every such announcement will cause great turmoil in the stock, bond and currency markets.
Discount rate: the discount rate is the interest rate charged by the Federal Reserve when commercial banks apply for loans due to emergencies such as reserves. Although this is a symbolic interest rate indicator, its change will also express a strong policy signal. The discount rate is usually lower than the federal funds rate.
30-year treasury bonds: 30-year treasury bonds, also known as long-term bonds, are the most important indicators to measure inflation in the market. Many times, the market measures the level of bonds by their yields rather than prices. Like all creditor's rights, 30-year treasury bonds are negatively correlated with prices. There is no clear relationship between the exchange rate of long-term bonds and the US dollar, but there is generally the following relationship: because inflation leads to a decline in bond prices, that is, an increase in yield, the US dollar may be under pressure. These considerations may be caused by some economic data.
However, with the implementation of the US Treasury's plan of "borrowing new debts to repay old debts", the circulation of 30-year bonds began to shrink, and then the position of 30-year bonds as a benchmark began to give way to 10-year bonds.
According to the different stages of the economic cycle, some economic indicators have different effects on the US dollar: when inflation does not become a threat to the economy, strong economic indicators will support the US dollar exchange rate; When the threat of inflation to the economy is obvious, strong economic indicators will suppress the exchange rate of the US dollar, and one of the means is to sell bonds.
As the benchmark of asset level, long-term bonds are usually affected by global capital flows. Financial or political turmoil in emerging markets will push up dollar assets. At this time, dollar assets as a hedging tool will indirectly push up the dollar exchange rate.
3-month Eurodollar deposit: 3-month Eurodollar deposit. Eurodollar refers to the dollar deposits of American foreign banks. For example, the yen deposits of Japanese and foreign banks are called "European yen". This difference in deposit interest rates can be used as a valuable benchmark for evaluating foreign exchange interest rates. Take USD/JPY as an example. When the positive difference between Eurodollar and Euroyen deposits is large, the USD/JPY exchange rate is more likely to be supported.
10-year treasury bonds: 10-year short-term treasury bonds. When comparing the yields of similar bonds between countries, we usually use 10-year short-term treasury bonds. The yield difference between bonds will affect the exchange rate. If the return on US dollar assets is high, the exchange rate will push up the US dollar exchange rate.
Ministry of Finance: Ministry of Finance. The U.S. Treasury Department is responsible for issuing government bonds and making budgets. The Ministry of Finance has no say in monetary policy, but its comments on the US dollar may have a greater impact on the exchange rate of the US dollar.
Economic data: Economic data. Among the economic data released by the United States, the most important ones include: labor force report (salary level, unemployment rate and average hourly wage), CPI (consumer price index), PPI, GDP (gross domestic product), international trade level, industrial production, housing starts, housing permits and consumer confidence.
Stock market: the stock market. The three major stock indexes are: Dow and S & amp；; Standard & Poor's 500 Index and Nasdaq Nasdaq Index. Among them, the Dow Jones Industrial Average has the greatest impact on the US dollar exchange rate. Since the mid-1990s, there has been a great positive correlation between the Dow Jones Industrial Average and the US dollar exchange rate (because foreign investors buy American assets). The three main factors that affect the Dow Jones Industrial Average are: 1) company income, including expected income and actual income; 2) Expectation of interest rate level; 3) Global political and economic situation.
Cross exchange rate effect: cross exchange rate effect. The rise and fall of the cross will also affect the exchange rate of the US dollar.
Federal funds rate futures contract: Federal funds rate futures contract. This contract value shows the market's expectation of the federal funds rate (related to the contract expiration date) and is the most direct measure of the Fed's policy.
3-month euro-dollar futures contract: 3-month euro-dollar futures contract. Like the federal funds rate futures contract, the three-month Eurodollar futures contract will also have an impact on the three-month Eurodollar deposit. For example, the spread between the three-month Eurodollar futures contract and the three-month Euroyen futures contract is the basic change that determines the future trend of USD/JPY.
Basic factors affecting the euro
Euro zone: Euro zone. It consists of 12 countries, including Germany, France, Italy, Spain, the Netherlands, Belgium, Austria, Finland, Portugal, Ireland, Luxembourg and Greece, all of which use the euro as their currency.
European Central Bank: European Central Bank. Control the monetary policy in the euro zone. The decision-making body is the Central Bank Committee, which consists of the Executive Committee and the central bank governors of 12 member countries. The Executive Committee includes the President, Deputy President and four members of the European Central Bank.
Policy objective of the European Central Bank: The primary objective is to stabilize prices. Its monetary policy has two main foundations, one is the prospect of price trend and price stability risk. Price stability is mainly measured by the adjusted consumer price index (HICP), so its annual growth rate is less than 2%. HICP is particularly important, which consists of a series of indicators and expectations, and is an important indicator to measure inflation. The second is to control the monetary growth of money supply (M3). The European Central Bank has set the reference value of M3 annual growth rate as 4.5%.
The European Central Bank holds a committee every two weeks on Thursday to set new interest rate targets. After the first meeting of each month, the European Central Bank will issue a briefing to announce the prospects of monetary policy and the overall economic situation.
Interest rate: general interest rate. It is the main short-term exchange rate used by the central bank to regulate the liquidity of the money market. The spread between this interest rate and the US federal funds rate is one of the factors that determine the exchange rate of Euro/USD.
Three-month euro deposit (Euribor): Three-month euro deposit refers to the euro deposit deposited in a bank outside the euro zone. Similarly, the spread between this interest rate and other countries' interest rates in the same period is also used to evaluate the exchange rate level. For example, when the interest rate of three-month Eurodeposit is higher than that of three-month Eurodeposit in the same period, the exchange rate of Euro/USD will be improved.
10-year treasury bonds: the spread between 10-year treasury bonds and 10-year US treasury bonds is another important factor affecting the euro/dollar. German 10-year government bonds are usually used as benchmarks. If its interest rate is lower than that of US Treasury bonds in the same period, then if the spread narrows (that is, the yield of German government bonds rises or the yield of US government bonds falls), it will theoretically push up the exchange rate of Euro/US dollar. So the price difference between them is generally more meaningful than their absolute value.
Economic data: Economic data. The most important economic data comes from Germany, the largest economy in the euro zone. The main data include: GDP, inflation data (CPI or HCPI), industrial production and unemployment rate. If you only look at Germany, it also includes the IFO survey (a widely used business confidence survey index). There is also the fiscal deficit of member States. According to the Stability and Growth Pact of the euro zone, each country's fiscal deficit must be controlled below 3% of GDP, and each country should have the goal of further reducing the deficit. Cross exchange rate effect: cross exchange rate effect. Like the dollar exchange rate, the cross will also affect the euro exchange rate.
3-month Euro Futures Contract (Euribor): 3-month Euro Futures Contract. This contract value shows the market's expectation of the 3-month euro deposit interest rate (related to the contract expiration date). For example, the price difference between the three-month Euroeuro futures contract and the three-month Eurodollar futures contract is the basic change that determines the future trend of the euro/dollar.
Political factors: Compared with other exchange rates, Euro/USD is most susceptible to political factors, such as domestic factors in France, Germany or Italy. Political and financial instability in the former Soviet Union countries will also affect the euro, because a considerable number of German investors have invested in Russia.
Basic factors affecting the pound
Bank of England (BoE): Bank of England. Since 1997, BOE has obtained the function of making its own monetary policy. The government takes the inflation target as the standard of price stability, generally measured by the retail price index (RPI-X) excluding mortgage loans, and the annual increase is controlled below 2.5%. Therefore, although monetary policy is formulated independently of government departments, BOE still has to meet the inflation standards set by the Ministry of Finance.
Monetary Policy Committee (MPC): Monetary Policy Committee. This Committee is mainly responsible for setting the interest rate level.
Interest rate: interest rate. The main interest rate of the central bank is the lowest lending rate (basic interest rate). In the first week of each month, the central bank will use interest rate adjustment to send a clear monetary policy signal to the market. Changes in interest rates usually have a greater impact on the pound. At the same time, JD.COM will also formulate monetary policy by adjusting the transaction interest rate of government bonds purchased from discount banks (designated financial institutions that trade money market instruments) every day.
Phnom Penh bond: Phnom Penh bond. British government bonds are also called gilt-edged bonds. Similarly, the spread between the yield of 10-year gilt bond and the yield of other countries' bonds or US Treasury bonds in the same period will also affect the exchange rate between the pound and other countries' currencies. 3-month Europound deposit: 3-month Europound deposit. Sterling deposits of non-British banks are called European sterling deposits. The difference between its interest rate and the European deposit rate of other countries in the same period is also one of the factors affecting the exchange rate.
Ministry of Finance: Ministry of Finance. Its function of formulating monetary policy gradually weakened from 1997. However, the Ministry of Finance still sets inflation targets for the Bank of England and decides on the appointment and dismissal of key personnel of the Bank of England.
The relationship between the pound and the European Economic and Monetary Union: The pound is often under pressure because of Prime Minister Tony Blair's remarks about the possibility of joining the single European currency, the euro. If Britain wants to join the euro zone, British interest rates must be reduced to euro interest rates. If the public votes to join the euro zone, the pound must depreciate against the euro for the development of domestic industrial trade. Therefore, any talk about the possibility of Britain joining the euro zone will depress the exchange rate of the pound.
Economic data: Economic data. The main economic data of Britain include: initial unemployment rate, initial unemployment rate, average income, retail price index without mortgage, retail sales, industrial production, GDP growth, purchasing managers' index, manufacturing and service industry survey, money supply (M4), income and house price balance.
3-month Europound futures contract (short-term pound): 3-month Europound deposit futures (short-term pound). The futures contract price reflects the market's expectation of the European pound deposit interest rate in three months. The price difference with other countries' futures contracts in the same period will also cause changes in the exchange rate of the pound.
Financial Times 100 index. Major British stock indexes. Unlike the United States and Japan, the British stock index has little influence on the currency. However, there is a strong correlation between the Financial Times index and the Dow Jones index.
Cross exchange rate effect: the influence of cross exchange rate. Cross exchange rate will also have an impact on the exchange rate of the pound.
Basic factors affecting the yen
Ministry of Finance (MOF): The Ministry of Finance of Japan is the only department in Japan that formulates fiscal and monetary policies. Japan's Ministry of Finance has more influence on currency than the United States, Britain or Germany. Japanese officials of the Ministry of Finance often make some remarks about the economic situation, which generally have an impact on the yen. For example, when the Japanese yen appreciates or depreciates relative to the fundamentals, officials of the Ministry of Finance will verbally intervene.
Bank of Japan (BoJ): Bank of Japan. 1998, the Japanese government passed a new law, allowing the central bank to independently formulate monetary policy without government influence, while the Japanese yen exchange rate is still under the responsibility of the Ministry of Finance.
Interest rate: interest rate. The overnight lending rate is the main short-term interbank interest rate, which is determined by the Bank of Japan. The Bank of Japan also uses this interest rate to indicate the change of monetary policy, which is one of the main factors affecting the exchange rate of the yen.
Japanese government bonds (JGBs): Japanese government bonds. In order to enhance the liquidity of the monetary system, the Bank of Japan buys Japanese government bonds with a maturity of 10 or 20 years every month. The yield of 10 year JGB is regarded as the benchmark index of long-term interest rate. For example, the basis of 10-year JGB and 10-year US Treasury bonds is regarded as one of the factors driving the interest rate of USD/JPY. The decline of JGB price (that is, the increase of yield) is usually beneficial to the yen.
Department of Economic and Financial Policy: Department of Economic and Financial Policy. 200 1 1 6 officially replaced the original Economic Planning Agency (EPA). Responsibilities include expounding economic plans and coordinating economic policies, including employment, international trade and foreign exchange rates.
Ministry of International Trade and Industry (MITI): MITI is responsible for guiding the development of Japanese domestic industries and maintaining the international competitiveness of Japanese enterprises. However, compared with11980 s and11990 s, its importance has been greatly weakened, when the trade volume between Japan and the United States will affect the foreign exchange market.
Economic data: Economic data. The more important economic data are: GDP, short-term survey (business prosperity and expected quarterly survey), international trade, unemployment rate, industrial production and money supply (M2+CDs).
Nikkei 225: Nikkei 255 index. Japan's major stock market indices. A reasonable downward adjustment of Japan's exchange rate will boost the share price of export-oriented enterprises, and at the same time, the entire Nikkei index will also rise. Sometimes, this is not the case. When the stock market is strong, it will attract foreign investors to invest heavily in the Japanese stock market, and the yen exchange rate will also be pushed up.
Cross exchange rate effect: the influence of cross exchange rate. For example, the rise of Euro/Yen will also cause the rise of USD/Yen, which may not be due to the rise of the exchange rate of USD, but because the economic expectations of Japan and Europe are different.
Basic factors affecting the Swiss franc
Swiss National Bank (SNB): Swiss National Bank. The Swiss National Bank has great independence in formulating monetary policy and exchange rate policy. Unlike most other central banks, the Swiss National Bank does not use specific money market interest rates to guide the monetary situation. Until the autumn of 1999, the central bank has been using foreign exchange swaps and repurchase agreements as the main tools to influence the money supply and interest rates.
Due to the use of foreign exchange swap agreements, the management of currency liquidity has become the main factor affecting the Swiss franc. If the central bank wants to improve market liquidity, it will buy foreign currencies, mainly US dollars, and sell Swiss francs, thus affecting the exchange rate.
From 1999 to 12, the central bank's monetary policy changed from a monetarist's approach (mainly aimed at money supply) to an inflation-based approach, and set it as the annual inflation ceiling of 2.00%. The central bank will use the three-month London Interbank Offered Rate (LIBOR) as a means to regulate monetary policy within a certain range.
Central bank officials can influence the trend of money by commenting on the money supply or the money itself.
Interest rate: interest rate. SNB uses the change of discount rate to announce the change of monetary policy. These changes have a great influence on the currency. However, the discount rate is not often used by banks as a discount function.
Three-month European Swiss franc deposit: three-month European Swiss franc deposit. Swiss franc deposits deposited in non-Swiss banks are called European Swiss franc deposits. The difference between its interest rate and the European deposit rate of other countries in the same period is also one of the factors affecting the exchange rate.
The role of Swiss franc as a safe haven currency: the Swiss franc has always played the role of a safe haven currency because: SNB independently formulates monetary policy; The secrecy of the national banking system and the neutrality of Switzerland. In addition, SNB's sufficient gold reserves are also of great help to the stability of the currency.
Economic data: Economic data. The most important economic data of Switzerland include: M3 money supply (broad money supply), consumer price index (CPI), unemployment rate, balance of payments, GDP and industrial production.
Cross exchange rate effect: the influence of cross exchange rate. Like other currencies, the change of cross exchange rate will also have an impact on the exchange rate of Swiss franc.
3-month EuroSwiss futures contract: 3-month EuroSwiss franc deposit futures contract. The futures contract price reflects the market's expectation of the deposit interest rate of the European Swiss franc in three months. The price difference of futures contracts with other countries in the same period will also cause the change of Swiss franc exchange rate.
Other factors: Due to the close economic ties between Switzerland and Europe, the exchange rates of Swiss franc and euro show great positive correlation. That is, the rise of the euro will also drive the rise of the Swiss franc. The relationship between the two is the closest among all currencies.