On November 10, the central parity rate of RMB against the US dollar rose to 6.5897, the highest value in more than two years since June 27, 2018 (nearly It has depreciated in the past two days and is at 6.6236 today). Since June, the RMB exchange rate against the U.S. dollar has bid farewell to the continued fluctuating depreciation trend since the outbreak of the trade war in April 2018. It has appreciated for nearly 6 consecutive months and has appreciated by 9% cumulatively to the previous day’s high. The market analysis reasons for this wave of appreciation come from: First, the overseas epidemic has continued to rise since June, while the domestic epidemic has been better controlled, and it has taken the lead in achieving positive economic growth, and the RMB currency value is strong; second, the US dollar continues to weaken, and the US dollar index has continued to trend upward since the end of May. It has dropped from nearly 100 to a minimum of 91.74, and is likely to continue to decline; third, domestic monetary policy has returned to normalization in the second half of the year, with large interest rate differentials between domestic and foreign markets and a large inflow of funds. After this rise to a new high, a large number of profit-taking orders emerged in the market, temporarily curbing the rise of the yuan. Foreign trade companies have also increased their efforts to purchase foreign exchange, believing that there is limited room for continued appreciation in the future. However, there are still many overseas funds that continue to be optimistic about the trend of the RMB, mainly based on factors such as China’s economic improvement, which leads the world, and the divergence of Chinese and foreign monetary policies. Their investment models predict that the equilibrium exchange rate of the RMB against the US dollar will reach 6.45-6.5 by the end of the year.
The appreciation of the RMB will benefit the import of cotton and cotton yarn. The price of raw materials and finished products quoted in the same US dollar will decrease when converted into RMB. Since June, the prices of cotton and cotton yarn at home and abroad have continued to rise. Benefiting from the appreciation of the RMB, the increase in foreign cotton and yarn has been slowed down by a large part, and the competitiveness has been correspondingly enhanced. Take foreign cotton as an example. On November 11, the Cotlook A index US dollar price increased by 19% cumulatively from the end of May. Under the 1% tariff, the RMB price rose by only 13% cumulatively. The appreciation of the RMB flattened the price increase by about 6 percentage points, to about 700. About yuan/ton. The US dollar price of imported yarn increased by 24% in the same period, while the RMB price only increased by 14%. The appreciation has flattened the price increase by about 10 percentage points, to about 1,800 yuan/ton. It can be seen that the higher the value of goods, the greater the increase in US dollar prices, and the role of RMB appreciation in reducing import costs becomes more obvious. Affected by this, the already expanding price difference between domestic and foreign cotton has been further magnified. According to the November import and export goods tariff rate of 1:6.6781, the average price difference between domestic and foreign cotton since November has been 1,904 yuan/ton. If the price difference was calculated before the RMB appreciation, Calculated at an exchange rate of 1:7.0956, the price difference between domestic and foreign cotton during the same period was only 1,127 yuan/ton. The appreciation of the RMB expanded the price difference between domestic and foreign cotton by nearly 800 yuan/ton. During the same period, the price difference between domestic and foreign yarns was affected by this, and it changed from an inversion of about a thousand yuan to the current state of a slight inversion.
Theoretically, the appreciation of the RMB will have more obvious benefits for textile companies that import raw cotton or semi-finished products such as yarn and gray fabrics and process them for domestic sales; for export-oriented textile companies that process imported materials, one in and one out. If the two offset each other, there will be little or little impact; it will be disadvantageous for textile companies that use domestic raw materials to produce products for export. If they export at the original US dollar price, the exchanged RMB income will decrease. In actual trade, the impact of exchange rate fluctuations on enterprises must be measured specifically based on whether the enterprise takes hedging measures, the exchange time or the proportion of imports and exports.
USD Index (181 days)
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