"The beast is back"! The strong dollar slapped pessimistic expectations in the face, and bearish analysts "capitulated" one after another!

By the end of 2022, many people believe thatbeautyThe yuan rally has ended, including Mark Nash, a fund manager at Jupiter Asset Management.

existbeautyAfter the Federal Reserve's interest rate hike sent the market into chaos, his bet on bonds paid off, and like many other funds, Nash made a common bet: withbeautyThe Federal Reserve's tightening policy is coming to an end.beautyThe yuan will decline.

At the beginning of this year,ThisThis seems to happen from time to time. However,In July,beautyYuan quickly changed directionWithbeautyChina has defied pessimistic forecasts, European economic growth has faltered, and global economic rifts have widened.beautyThe yuan has rallied sharply, surging against almost all major currencies in the past two months.

ThisAn unexpected recovery is reverberating around the world.Investors are now closing their short positions、Japanese officials are getting ready to take action to protect the yen、beautyChinese companies are bracing for a hit to profitsIn developing countries, it evokes "painful memories" of 2022, whenbeautyThe yuan caused an economic shock by pushing up commodity prices in global markets and increasing the burden of foreign debt.Nash was forced to give up his bearish position midyearbeautyYuan position, and said:

“beautyYuan has become a beast again. "

beautyThe yuan's rebound indicates thatThe market isbeautyThe country's economy is surprisingly resilientandThe ensuing persistent inflation was a surprise.andBy the end of 2022, the vast majority of economists predict that,beautyThe Fed may already be "fighting" recession by cutting interest rates.

However,As overseas economic growth shows signs of stalling,beautyThe country's economy is still growing strongly。ThisIncentivize investors to transfer funds tobeautyCountry,The federal funds rate is expected to remain high.beautyShares are receivingbeautyThe Federal Reserve will end the expected support for the rate hike cycle with the economy largely intact。ThisThe two factors jointly promote the compilation of foreign mediabeautyThe yuan spot index returned to near the high of the year.

However, so far, the index is still below last year's peak.ThisMakes its impact much smaller than in 2022, whenbeautyThe sharp appreciation of the yuan has pushed up thebeautyThe cost of commodities such as oil in yuan has added to global inflationary pressures.

Industrial foreign exchangeAnalysts are abandoning their bearish views

Due to thebeautyThere is little confidence that the momentum behind the yuan's recent rally will soon reverse, and analysts have been giving up their bearish viewsbeautyYuan.

Charles Diebel, head of fixed income at Mediolana International Funds, has argued that going into 2023,beautyThe yuan will weaken, but asbeautyThe country's economy continued to perform well, and he shifted to a neutral stance around mid-year. He said:

"If you put a gun to my head, I might still be leaning towards the next 6 to 12 monthsbeautyThe yuan will weaken, but in the next three months, I'm not so sure, it may strengthen further. "

Audrey Childe-Freeman, chief G-10 foreign exchange strategist for foreign media, said, "The cyclical bullish trend that will dominate in 2022beautyThe meta-driver is back，beautyThe relative resilience of the national economy contrasts sharply with the economic concerns in the euro area. "

Societe Generale strategist Kit Juckes said,The current market is being driven more by different growth prospects than by interest rates themselvesHe pointed out that the euro was still falling despite the European Central Bank raising interest rates last week, a move he attributed toThe European Central Bank is more pessimistic about economic growth prospectsHe wrote in a note to clients, "The only thing I can think of that is good for the euro and the pound is that compared tobeautyChina's expectations for growth in the UK and the eurozone are already dire”。

existbeautyCountry,A more optimistic earnings outlook has helped buoy share prices, butbeautyThe appreciation of the yuan is reducing the overseas earnings of some companiesAnalysts at Credit Suisse Group estimatebeautyEvery 8% to 10% appreciation of the yuan,beautyCorporate profits would fall by about 1% on average.

But overall,The first to be affected may be emerging market countries。ThisIn part becausebeautyA stronger yuan makes imported goods more expensive and overstates inflationary pressures.Prompting central banks to keep interest rates high to defend their currenciesTo prevent capital outflows.

Last week, the Polish government stepped in to boost the zloty after the country cut interest rates more than expected, triggering a currency sell-off. In the past,ThisSuch interest rate changes may not be punished, butbeautyThe strengthening yuan leaves little room for some countries to ease policy to support economic growth.

Japanese officials also issued their strongest recent warning this month, when Makoto Kanda, deputy finance minister for international affairs, said,If the yen depreciates further, the government is ready to intervene in the market again.

Eva Sun-Wai, a fund manager at M & G Investments in London, wrote in a note to clients that "if a number of central banks intervened in their currencies through foreign exchange reserves (or through sales)beautyNational debt),beautyThe future of Yuan will be uncertain. "

beautyThe country's economic downturn may also suppressbeautyYuan, although there is no sign yet that it will appearThisThis situation.

Nash is one of the investors hit by global market shifts this year. Last year, his bond fund returned more than 6%, more than 90% of its peers. But when Silicon Valley Bank's collapse sparked concernsbeautyFears of a credit crisis in China and unexpected fluctuations in bond prices have caused the fund to decline by about 1% in 2023.

He was also troubled by his previous bearishbeautyYuan bets. Sometimes,beautyThe yuan will fall on weaker-than-expected data, but it will reverse in a few hours. He believesThisThis is a clear signal.beautyThe yuan's move reflects weaker growth prospects in the rest of the world. Therefore, he gave up bearishness in JunebeautyYuan's point of view. He said:

“beautyChina's growth story has been strong, while the rest of the world has been weak. ifbeautyThe Federal Reserve seeks to contain inflation, whilebeautyThe economy continues to grow.beautyYuan will remain strong. "