On September 95 the offshore RMB fell below the 7.31 mark against the U.S. dollar and fell during the day. More than 300 basis points.
Since this year, the RMB exchange rate has been riding a roller coaster, rising and falling with huge fluctuations. It has had some impact on textile people. Some textile people have made money from it, while others have had a headache.
The Fed issues bonds and the RMB depreciates
In the short term, this round of exchange rate changes is mainly due to the Federal Reserve’s issuance of bonds. Its bonds are very popular with the market because of their very high interest rates and controllable relative risks, and they have also drained the market of liquidity. Therefore, in addition to the renminbi, major currencies such as the yen, euro, and pound sterling are also depreciating.
In the long run, the main reason for changes in the RMB exchange rate is the difference in fiscal policies between China and the United States.
Since this year, my country’s performance on the production side has remained stable, but the problem lies on the consumption side. On the one hand, foreign trade is sluggish, and my country’s textile exports dropped year-on-year in July. Domestic interest rate cuts and overnight reverse repurchase rates have reduced the cost of banks obtaining funds from the market.
Cutting interest rates is one aspect, and the possibility that the United States will continue to raise interest rates this year is another possible influencing factor. The Federal Reserve is currently in the midst of a “Schrödinger’s rate hike,” but the possibility of further interest rate hikes in the future has not been eliminated.
The U.S. dollar interest rate is now close to 5%. Although long-term U.S. debt may be relatively risky, the risk of short-term U.S. debt such as one-year debt is much smaller. Therefore, U.S. debt As soon as it was issued, funds flooded into the market, draining market liquidity. Although there are so many U.S. dollars printed, there is a shortage of U.S. dollars in the market. The situation is so absurd. Think of the U.S. dollar as a commodity. If the U.S. dollar is lacking, the price will rise, and the exchange rates of other major foreign currencies will depreciate relatively.
What impact will it have on the textile industry?
The first is foreign trade. Generally speaking, fluctuations in the RMB exchange rate will directly affect the profits of foreign trade companies. In particular, the depreciation of the exchange rate has a very obvious effect on export promotion. However, the exchange rate has changed so much in the past two years that many foreign trade customers have learned to keep a secret when setting prices so as not to allow textile companies to make money from the exchange rate difference.
The editor has interviewed many foreign trade bosses. Almost all of them believe that a stable exchange rate is the best exchange rate. Doing business must be within a controllable risk range so that costs can be better calculated. Otherwise, it is just a simple matter. It depends on luck.
In addition, the RMB exchange rate is unlikely to fall all the way. First of all, the Fed’s bond issuance is only a short-term action, and it is impossible to keep the liquidity of the US dollar tight for a long time. After this wave of market conditions has passed, the US dollar index may fall back, and the RMB will strengthen relatively; on the other hand, the financial performance of the People’s Bank of my country The policy toolbox is still sufficient. Since this year, our country has been bucking the trend and cutting interest rates. Especially recently, in order to promote consumption, it has lowered the interest rate of existing mortgage loans, “recognized the house but not the loan”, and halved the stamp duty, which shows that the country is committed to We have confidence in stabilizing the exchange rate. When we reach a certain point, we can take out another tool from the policy tool box and it may be able to affect the exchange rate trend in the short term.
Is it okay if we don’t use US dollars?
In fact, compared to exchange rate fluctuations, two other recent news may have a more profound impact on the future of textile companies.
The first article, on 9month4 local time, the Brazilian pulp company Eldorado Company ( span>ELDORADO) used RMB as the trade settlement currency for the first time when exporting pulp to China.
Article 2,The 15th BRICS leaders’ meeting was recently held in Johannesburg, South Africa, and achieved a new round of historic expansion, attracting global attention.
The first piece of newsThe second piece of news seems to be about the internationalization of the RMB. It seems to be about the BRICS summit. In fact, it is about not only emerging markets but also the vast number of developing countries who want to become independent. Develop an independent local currency mutual recognition and settlement system.
Our country has�The goods that other countries want, other countries have the raw materials that our country wants, but because they are short of dollars, the transaction cannot be concluded. Therefore, although the US dollar is still the world’s main settlement currency, a large number of developing countries around the world have a great demand to get rid of US dollar settlement.
Especially after entering 2022, RMB internationalization and de-dollarization have become the general trend. Perhaps in the near future, we will see more and more similar news appear. Textile People no longer have to worry about exchange rate fluctuations when doing business, they can just use RMB.
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