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The Impact Of A Rising Dollar On Markets

The A shares

In theory, A rise in the dollar and A rise in the interest rate on U.S. treasuries should attract capital inflows into the United States. However, as our foreign exchange control is relatively strict, there will not be much capital outflow. In the short term, the impact on A shares will not be significant.


In Hong Kong

The Hong Kong dollar is pegged to the us dollar, it's a fixed exchange rate, the us dollar goes up, the Hong Kong dollar goes up, the us dollar goes up two points against the RMB, that means the Hong Kong dollar goes up two points against the RMB. Some people regard Hong Kong stocks as "quasi-dollar assets". If they invest in Hong Kong stocks in the expectation of dollar appreciation, they can enjoy the benefits of foreign currency appreciation. Of course, for mature markets like Hong Kong stocks, the fundamentals ultimately matter.


For U.S. stocks

The impact of the dollar on U.S. stocks cannot be generalized. On the one hand, the appreciation of the currency is not good for export companies, and business conditions may be impaired, causing stock prices to fall. On the other hand, the trend of currency appreciation will lead to capital inflows into us stocks, the increase of market liquidity and the rise of stock prices.


In the short term, the dollar will continue to rise, but April's surge is unlikely to be repeated. Although the U.S. economic recovery is better than Europe's, from the first quarter data, the pressure on the economy from rising interest rates and rising oil prices is also gradually reflected. In Europe, the process of raising interest rates is still relatively loose, so the economic growth is not pessimistic. The 10-year Treasury yield, at 3 percent, is near the top of the rate-hike cycle and the dollar's support for interest rates will weaken.