First of all, the interest rate is influenced by the average profit level of the industry, money supply and demand and economic development. Secondly, it is influenced by price level, interest rate control, international economic situation and monetary policy.
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With the acceleration of globalization, the domestic economy is more and more closely linked with the global economy, and the domestic interest rate level is increasingly affected by global economic growth and inflation. As can be seen from the above figure, there is an obvious negative correlation between the US dollar index and the yield of China 10 government bonds.
From the perspective of economic growth, the dollar is an important safe-haven asset. When the global economic growth rate decreases, the increase in demand for US dollars will push up the US dollar index, while the global economic shock will lead to the fluctuation of interest rates, so the domestic interest rate is negatively correlated with the US dollar index. From the perspective of inflation, the US dollar is the most important settlement currency in international trade, and the US dollar index is negatively correlated with commodity prices.
The downward trend of the US dollar index is usually accompanied by the rising prices of crude oil and other commodities, which will drive domestic inflation expectations and then raise interest rates.
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