01. Fake Interest Rate Hike

In March of this year, before the United States raised interest rates, the position of the US Dollar Index was at 95.

Initially, the rise in the US Dollar Index was not very noticeable. In order to accelerate the appreciation of the US dollar, the Federal Reserve continuously increased the magnitude of interest rate hikes.

The second interest rate hike was raised to 50 basis points, and from the third interest rate hike onwards, the magnitude was maintained at 75 basis points. Subsequently, the US Dollar Index rose to its highest point of 114 in September, nearly breaking through 115.

Although the Federal Reserve attributed the reason for raising interest rates to the high inflation at a 40-year high, in reality, we observed that despite the Federal Reserve's continuous interest rate hikes, inflation did not show a significant decline.

The financial world understands that the real reason for the Federal Reserve's interest rate hikes is to export inflation abroad and force non-US currencies to depreciate, so that the United States can complete a round of wealth harvesting. This is tantamount to initiating a currency war.

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To achieve this goal, the Federal Reserve obviously still needs to continue raising interest rates.

However, after a 75 basis point interest rate hike in November, the United States was surprised to find that the US Dollar Index was accelerating its decline.

Next week, the Federal Reserve is expected to raise interest rates by another 50 basis points, but it is estimated that it will once again be referred to by the market as a "fake interest rate hike," meaning that while the interest rate has increased, the US dollar has fallen, and the interest rate hike has produced the opposite effect.

02. Counteroffensive of the RenminbiThe speed at which the Chinese yuan is rising against the dollar is even faster than the dollar's decline.

The yuan hit a low of 7.37 against the dollar, but then began a significant rally, marking a major counteroffensive in this currency war.

Especially last week, the offshore yuan exchange rate surged by 1,766 points, and this week it rose by another 500 points. At its highest, the exchange rate has already reached 6.93, and the psychological threshold of 7.0 that investors were watching has been easily reclaimed.

Due to the continuous purchase of Chinese assets by foreign capital, the future exchange rate of the yuan will continue to rise.

At the same time, the dollar's 20-year high is at risk.

03, US Dollar Index

From the historical trend, we can also see that the US Dollar Index is unlikely to have a chance to fight back.

At that time, the US Dollar Index was falling from a high of 125. Before that, the reason why the US Dollar Index kept rising was because, after experiencing high inflation in the 1970s, the Federal Reserve took significant interest rate hikes in the 1980s to curb inflation.

The situation at that time is similar to the current one, which is why we often hear about inflation at a 40-year high, which is actually comparable to the inflation levels at the beginning of the 1980s.

After that round of significant interest rate hikes, the US Dollar Index also reached a high level, and then the interest rate hikes stopped and began to turn to interest rate cuts, leading to a significant drop in the US Dollar Index.Around 2001, the US Dollar Index once again surpassed 120. This surge was also due to interest rate hikes. However, shortly thereafter, the United States faced the bursting of the internet bubble and the subsequent 9/11 events, forcing the Federal Reserve to switch to interest rate cuts, which similarly led to a rapid decline in the US Dollar Index, falling to a low of 70 by 2008.

It is evident that the previous increases were entirely due to interest rate hikes; once the hikes ceased, the US Dollar Index would plummet.

The current rise in the US Dollar Index has not yet reached 120, and it now seems unlikely to ever reach that level again.

04. Selling US Dollars

International capital is currently experiencing a surprising reverse flow.

Although the US dollar has been continuously rising, funds have been consistently selling US dollar assets.

In the stock market, due to the impact of the Federal Reserve's interest rate hikes, capital outflows have led to a significant decline in US stocks.

In the bond market, continuous selling has caused US Treasury yields to keep rising.

Starting from July, signs of a collapse in the US real estate market have emerged, with transaction volumes decreasing and housing prices beginning to fall on a month-over-month basis.

However, in stark contrast, foreign capital is entering the Chinese yuan asset market, whether in stocks, bonds, or real estate.