Yesterday, the US dollar index rose sharply by 1.69%, closing at 105.15. From the perspective of technical graphics, after a continuous rise since October, the dollar index has broken away from the lows of the year and rebounded to the upper middle of the range of fluctuations since November 2022. In the short term, the 103.8 level, where the 200-day moving average is located, provides support. However, it's crucial to monitor whether the US dollar index can stabilize at the 105 mark.
Major currency pairs
GBP/USD
The Bank of England will hold an interest rate meeting tonight. The market expects the Bank of England to cut interest rates by 25 basis points at this meeting, but the probability of a December interest rate cut is low. Investors need to pay attention to the Bank of England's explanation of the future policy path and whether Governor Bailey will express his views on the autumn budget. If the concerns about the obstruction of the alleviation of subsequent inflationary pressure are conveyed, there is still a possibility that the pound will be boosted.
RMB against other currencies
- **RMB against the US dollar**: On November 7, 2024, the central parity rate of the RMB exchange rate in the interbank foreign exchange market was USD/RMB, which was reported at 7.1659, an increase of 666 points from the previous trading day (i.e., the depreciation of the RMB).
- **RMB against other major currencies**: The exchange rate of the euro/RMB was reported at 7.6862, down 549 points; The exchange rate of Hong Kong dollar/RMB was quoted at 0.9217, up 84.6 points; The exchange rate of pound sterling/RMB is 9.2290, down 94 points; The exchange rate of AUD/RMB is 4.7074, up 29 points; The exchange rate of Canadian dollar/RMB was quoted at 5.1396, up 110 points; The exchange rate of 100 yen/RMB is quoted as 4.6400, down 350 points; The exchange rate of RMB/Russian ruble was quoted at 13.6093, down 1745 points; The exchange rate of New Zealand dollar/RMB was quoted at 4.2574, down 34 points; The exchange rate of RMB/Ringgit was quoted at 0.61579, up 38 points; The Swiss franc/RMB exchange rate was quoted at 8.1784, down 355 points; The Singapore dollar/RMB exchange rate was quoted at 5.3746, down 199 points.
Analysis of Market Influencing Factors
Macroeconomic factors
- **Balance of payments**: When a country has a deficit in its balance of payments, it is reflected in the foreign exchange market as a demand for foreign exchange exceeding supply, which leads to an appreciation of the foreign exchange and a depreciation of the local currency. On the contrary, if the balance of payments is in surplus, the foreign exchange will depreciate and the local currency will appreciate.
- **Inflation rate difference**: When the inflation rate of a country is higher than that of other countries, it means that the currency of that country is depreciating both internally and externally, which may lead to the devaluation of the currency of that country, and vice versa.
- **Interest rate differential**: When a country's economy is basically in a normal state, if the domestic interest rate is higher than the foreign interest rate, it will promote capital inflows, leading to an oversupply of foreign exchange and thus an appreciation of the local currency; When the domestic interest rate is lower than the foreign interest rate, it will lead to capital outflow, and the foreign exchange will be in short supply, which will further depreciate the local currency.
Policy factors
The expectation of a rate cut at the Bank of England's interest rate meeting will have an impact on the trend of the pound, and investors need to pay attention to the statement of its policy path and the relevant views of the governor.
- The potential impact of the relevant policies of the Federal Reserve still exists, including the timing and path of the exit from quantitative tightening, which continue to affect the trend of the US dollar.
- The People's Bank of China conducted a 7-day reverse repo operation of 19.2 billion yuan on the same day. Due to the maturity of 327.6 billion yuan of 7-day reverse repos on the same day, the net withdrawal was 308.4 billion yuan, and the bid rate was 1.50%, which was the same as before. This situation had an impact on the central parity rate of the RMB exchange rate.
Other factors
Geopolitical risks remain a potential factor affecting the foreign exchange market. If geopolitical risks escalate again, it will have an impact on currency exchange rates.
- Investors' psychological expectations will have an impact on the supply and demand relationship of currencies. For example, the expectation of a certain currency appreciation may lead to capital inflows, which in turn will promote the appreciation of that currency.
Impact of major international events
For example, the hosting of the 2024 Olympic Games will bring a series of impacts. During the Olympic Games, the attention of global investors is highly concentrated, and market sentiment fluctuates. Afterwards, it may return to rationality, but there may still be some fluctuations in the short term. For the host country, the Olympic Games attracts tourists and increases investment, which will have an impact on the demand for its currency. The successful hosting of the Olympic Games may also be a signal of global economic recovery, which will affect the foreign exchange market.
Summary
On November 7, 2024, the US dollar index rose in the global foreign exchange market, and the exchange rates of major currencies experienced varying degrees of change, such as the depreciation of the RMB against the US dollar. The foreign exchange market is affected by a combination of macroeconomic factors, policy factors, and other factors, including international balance of payments, inflation rates, interest rates, central bank policies, geopolitical risks, and investor psychological expectations. At the same time, major international events such as the Olympic Games will also have an impact on the market.
