On the 14th, the central parity rate of the RMB against the US dollar increased by 1,008 basis points to 7.0899 yuan, the largest single-day increase since July 23, 2005.
At the opening of trading on the 14th, the market exchange rates of onshore and offshore RMB against the US dollar continued to rise. As of 10:09, the spot exchange rate of onshore RMB against the US dollar was reported at 7.0840 yuan, an increase of 266 basis points from the previous closing price; the spot exchange rate of offshore RMB against the US dollar was reported at 7.0748 yuan, an increase of 175 basis points from the previous closing price.
The RMB exchange rate rose too much this time. On the one hand, due to the increased probability of the Federal Reserve slowing down and raising interest rates, the U.S. dollar index had limited upward space, which reduced the passive depreciation pressure of the RMB against the U.S. dollar. On the other hand, the epidemic prevention and control policies continued to be optimized, and the economy continued to trend in the long term. The good fundamentals have not changed, and the previous policies to stabilize the exchange rate and stabilize expectations have gradually taken effect, boosting market confidence and promoting a sharp rebound in the RMB exchange rate.
01Exchange rate differences cause profits to disappear
Will textile foreign trade people feel a little “thumped” in their hearts after seeing this news? Some people may think: Fortunately, the US dollars in my account were settled early, around 7.2, and I made a lot of money! Some people may think: It’s over, you’ve missed the highest point of foreign exchange settlement! Now that I’m done, I feel like I’ve lost again! Will it fall back again? Should we wait any longer? Oops, I really regret it!
However, for textile foreign traders, the most important thing is the exchange rate during foreign exchange settlement. The difference caused by exchange rate changes may be the company’s profit for half a year or even a year, so it is crucial. For example, on November 11, US$10,000 could be exchanged for 72,000 yuan, but now it can only be exchanged for about 70,000 yuan. In other words, you haven’t done anything, and your $10,000 is missing by more than 2,000 yuan! This year, corporate profits have been hovering on the edge of losing money. If the exchange rate difference is not well controlled, profits will disappear.
It will also have a certain impact on the next foreign trade orders, which may hinder the order time. Although many foreign trade textile experts said that in terms of fabric quotations, they will hardly follow the exchange rate changes. However, after the exchange rate fluctuates, foreign customers know that it is beneficial to domestic suppliers, so they will use this to request price reductions. In order to secure customers and win orders, foreign trade companies often accept requests for lower prices.
02 Ocean freight continues to fall or orders may be received
Entering November, the market began to cool down, especially with the end of “Double Eleven”. The domestic sales market returned to dullness. At the same time, foreign trade orders, which had always performed well, also declined. The main ordering time in the domestic market in the second half of the year is concentrated in September and October, and the orders become smaller as the days go by. This is why many industry insiders in the market currently say that this year’s market is over. However, the foreign trade market is different. During the domestic Spring Festival holiday, business abroad is normal. Therefore, in order to produce normally during this period, foreign customers will purchase fabrics before the domestic Spring Festival holiday, and this period also happens to be the new year’s holiday. A new season after another. According to feedback from foreign trade companies, the period from December to the Spring Festival holiday is also a period when foreign trade orders are intensively issued, which will be quite busy. Therefore, for foreign traders, there may be another wave of market conditions.
At the same time, good news came from the foreign trade market that sea freight rates continued to fall: freight rates fell for 20 consecutive weeks! The Container Index hits a two-year low and is the lowest level in the past 24 months! As freight rates continue to decline, foreign trade orders will no longer be terminated or delayed due to high freight rates. At the same time, because sea freight was originally too high, European and American customers chose to get fabrics and garments in Southeast Asia in one step, eliminating the freight of shipping fabrics from China to garment factories in Southeast Asian countries, which means that some orders will be returned. This has a positive effect on the domestic foreign trade market.
With the exchange rate rising and sea freight falling, foreign trade textile workers breathed a sigh of relief in the short term. This year’s foreign trade market performance is very outstanding and unexpected. With the recovery of overseas economies, the textile foreign trade market will also get better and better. Foreign trade people, please seize the last wave of orders this year and have a perfect ending!
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