The U.S. dollar has always been considered the most reliable, safe and stable currency, and its role in global trade has made it a pillar of the global financial system。In addition, it is the most widely used currency for foreign exchange transactions, international debt securities, cross-border loans, trade invoices and SWIFT payments.。

However, the dollar index fell more than 1% last week to get into trouble。Dollar index at 103 despite February nonfarm payrolls up 275,000.Small fluctuations below 00。China's economic policies, such as currency pegs, export strategies and trade dynamics, have a significant impact on the dollar and global liquidity。

China's Economic Policy

China's consumer inflation reaches 0.7%, the highest in a year, indicating a significant increase in consumer prices and a significant decline in production prices.。January's decline was 0.8%, the highest in 14 years。

Asian banks remain calm while Western central banks keep raising interest rates。For example, the PBOC has cut key policy rates three times since 2021, and the current situation foreshadows more cuts。

China's central bank has been increasing liquidity to help stabilize financial markets, tamping the market along with the People's Bank of China's capital injection。On March 11, 2024, the People's Bank of China issued a 1.8% interest rate for a seven-day reverse repurchase of 10 billion yuan.。By increasing liquidity, China hopes to grow its economy by 5% in 2024。

China's reverse repo will have a potential impact on global liquidity in terms of affecting investor confidence, market dynamics and financing costs.。As China has been a key player in regulating the world economy, its liquidity directly affects foreign exchange and thus global financial stability.。

Impact on the dollar and global liquidity

China's inflation will boost investor confidence, allowing more capital to flow into the Chinese market and the yuan to strengthen, thereby boosting the Chinese economy; however, the dollar may exert depreciation pressure on the yuan and strengthen itself; on the other hand, the dollar may depreciate when the People's Bank of China reduces its intervention in the currency market。

China's injection of liquidity will increase global demand for oil and commodities, making the world dependent on these resources。In addition, the increase in liquidity may indirectly affect CPI inflation in the。Investors seeking high returns may move money to China, affecting demand for the dollar。Overall, the real trade-weighted value of the dollar is likely to decline。

Conclusion

China's economic policies have major implications for global finance。As the world's second largest economy, China's every move will ripple across borders, affecting currency, liquidity and stability.。Despite the historical reliability of the dollar, recent financial moves in China have raised concerns among investors。

China's comparative monetary policy initiatives, including enhancing liquidity and promoting economic growth, have played a key role。

As China's liquidity decisions resonate globally, investor confidence, market dynamics and funding costs will all be affected, while the dollar will be shaken by China's actions.。In international finance, China's economic policy will remain a key force, with significant implications for global money and liquidity.。