Wind data shows that as of 16:30 on the 26th, the exchange rate of the onshore RMB against the U.S. dollar fell to as low as 7.238, setting a new low in seven months; the exchange rate of the offshore RMB against the U.S. dollar once fell below 7.24 during the session, hitting a low of 7.2408 , also set a new low in seven months.
The editor’s circle of friends has also been flooded with exchange rates. Everyone is lamenting that the U.S. dollar exchange rate is too high, which makes people sigh.
In fact, the yuan has been weakening for some time. Since May, the onshore RMB exchange rate against the U.S. dollar has fallen by 3.83%, and the offshore RMB exchange rate against the U.S. dollar has fallen by 4.18%.
The recent depreciation of the RMB exchange rate is affected by various internal and external factors. On the one hand, although the Federal Reserve paused raising interest rates in June, market expectations that it will continue to raise interest rates in July have recently increased. Expectations for another interest rate hike in July have increased, pushing the U.S. dollar index to strengthen, which has a significant impact on the short-term trend of the RMB exchange rate. On the other hand, my country’s economic recovery has slowed down since the second quarter, which may have affected the trend of the RMB exchange rate to a certain extent.
RMB depreciation is beneficial to corporate exports
Is the depreciation of the RMB and the appreciation of the US dollar good or bad for textile people? Let’s analyze it now. As a major textile and apparel exporting country, most companies in the downstream textile manufacturing industry are export companies. For example, the price of goods priced in US dollars will fall, which is equivalent to an external discount. A sudden discount will often arouse consumers’ desire to buy, so it is beneficial to foreign trade export companies.
At the same time, export companies all settle their accounts in U.S. dollars, that is, the payment received is in U.S. dollars and must be converted into RMB, which is what we usually call foreign exchange settlement in the industry. For example, the exchange rate in May was 6.9, and 1 U.S. dollar could be exchanged for 6.9 yuan. Before the Dragon Boat Festival, 1 U.S. dollar could be exchanged for 7.1 yuan, an increase of 0.2 yuan. After the Dragon Boat Festival, 1 US dollar can be exchanged for 7.2 yuan, which is 0.1 yuan more. So for foreign trade companies, an order may cost several thousand, tens of thousands or even tens of millions of yuan more. And this extra money depends purely on the exchange rate. To put it bluntly, it is equivalent to getting it for nothing.
Therefore, a moderate depreciation of the RMB will help improve the international competitiveness of the textile and apparel industry, help enterprises settle foreign exchange, and help stabilize growth, employment and exports.
RMB depreciation is not conducive to corporate repayment
On the international front, the global situation has been turbulent in recent years, with trade frictions and geopolitical frictions constantly emerging. The turmoil in the international situation mainly affects people’s psychology. Risk aversion will increase and people will be more cautious in consumption and investment, thus affecting currency circulation. On the other hand, large exchange rate fluctuations will affect market mentality, consumption will be downgraded, and terminal demand will be sluggish.
For orders received by foreign trade companies, although the price has already been set when the contract is signed, no changes can be made to the price. However, since the depreciation of the RMB is good for exports, foreign customers who have placed orders expect that the U.S. dollar will continue to appreciate, so they will prolong the bill period and fail to pay in time. Then foreign trade companies will not only not be able to get the dividends from the depreciation of the RMB and exchange settlement, but they will also be unable to get payment for goods on time.
Then the depreciation of the RMB is not conducive to the settlement of payments by textile export enterprises and the improvement of terminal demand. Factories will face problems such as high inventory of finished products and tight cash flow.
The business manager of a foreign trade company said that if the orders received in the past were settled in foreign exchange recently, there would be a 4-5% increase in revenue. However, it is not easy to receive orders recently. Customer order demand has decreased, and it is the traditional off-season, and due to the range of exchange rate changes Big, we will be very cautious about price calculations at the moment.
In short, the exchange rate is a double-edged sword. Whether it appreciates or depreciates, both have advantages and disadvantages. Moderate depreciation of the RMB is the most direct way to boost exports, thereby promoting my country’s economic development. Of course, some people are worried about whether the RMB will continue to depreciate. The editor believes that there is no need to worry. Our country’s economy is continuing to rebound and is improving, which is the strong backing of the RMB.
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