As the US dollar exchange rate rises above 7.1, it’s time for sellers to replenish their blood!

Exchange rate fluctuations always concern cross-border sellers. Since the beginning of the year, the US dollar exchange rate has seen a surge, and many sellers have seized the opportunity to convert foreign exchange into RMB. Some sellers even said that they earned a house during the best period of converting foreign exchange.

On the last day of May, the RMB/USD spot exchange rate fell below the 7.10 mark during trading. The US dollar exchange rate rose, and the British pound also rose. On May 31, it rose to 8.81, the highest point in more than a year. Although the US dollar is currently on a good trend, many sellers still have a sense of crisis and plan measures in advance to cope with exchange rate fluctuations.

The US dollar exchange rate has risen above 7.1. Have you converted your currency into RMB?

On May 17, the offshore RMB fell against the U.S. dollar, falling to 7.0101 during the session. This is the first time that the offshore RMB exchange rate against the U.S. dollar has broken through the integer mark of "7" since December 29, 2022.

Subsequently, the RMB exchange rate against the U.S. dollar continued to be under pressure.

On May 31, the offshore RMB exchange rate against the US dollar fell below the 7.1 mark during trading, and then fell below the 7.11 mark for a time, closing at 7.1065 at 16:30, down 164 basis points from the previous trading day. At the same time, the pound exchange rate also rose, rising to 8.81 on May 31, the highest point in more than a year.

The US dollar has appreciated significantly, and sellers are celebrating collectively ↓

When I saw the rare high point, I changed it immediately.

The current exchange rate of the US dollar is really good for those of us doing foreign trade.

The US dollar is too strong and is still rising.

Raise it as much as possible, and raise it higher.

The rise in the US dollar exchange rate means that sellers' profits have increased, so many sellers were overjoyed when they heard the news, but some sellers who cashed out early felt that they had missed out on 100 million yuan. Some sellers said frankly that the appreciation of the US dollar had a great impact on their exchange gains. If the US dollar continues to appreciate, relying on the exchange rate, it is very likely that the house loan will be paid off in one go.

The impact of exchange rate fluctuations on cross-border e-commerce is more like a double-edged sword. It not only indirectly pushes up the US dollar exchange rate, which is beneficial to exports, but also substantially affects the supply chain and operations of the cross-border e-commerce industry.

The rising US dollar exchange rate has the most direct impact on cross-border sellers:

1. Settlement profit increases. Sellers can earn the difference by withdrawing USD to RMB. The seller's profit increases by the same amount as the exchange rate increases. With the exchange rate of 7.1 compared to the previous 6.9, sellers can get an additional 200,000 RMB.

2. For Americans, the exchange rate rises, and the same dollar can buy more products, which is equivalent to an increase in American purchasing power. Overseas consumers will bring more orders to sellers;

3. The product price is more advantageous. The seller’s domestic purchasing cost remains unchanged. Due to the increase in exchange rate, the product price is cheaper.

4. Americans' spending will increase, and they will be more willing to keep their money or spend it.

As the US dollar exchange rate rises, many sellers begin to exchange currencies, but many sellers also believe that they can wait and see and wait for it to continue to rise.

According to the data in May this year , the central parity rate of RMB against the US dollar fell from 6.9240 to 7.0821, a drop of 1,581 points, or 2.28%; the spot exchange rate of RMB against the US dollar fell from 6.9284 to 7.1065 at the end of the month, a cumulative decline of 2.57%.

Although the US dollar exchange rate is currently on the rise, the market is not optimistic about the future trend of the US dollar.

After the US dollar exchange rate breaks "7.1", it may return to the 6 range

Looking ahead to the future trend of the US dollar exchange rate , the experts interviewed generally believe that there is not much room for the US dollar to appreciate, especially after the expected interest rate hike by the Federal Reserve is realized.

Relevant experts believe that in the short term, the trend of the U.S. dollar exchange rate "breaking 7" may continue for some time. As the Fed's current round of interest rate hikes enters the final stage and the impact of the U.S. banking crisis, the downward pressure on the U.S. economy has further increased, and it is unlikely that the U.S. dollar index will continue to rise in the future.

"As the domestic economic recovery process continues in the second half of the year, and taking other influencing factors into consideration, the US dollar exchange rate may depreciate slightly year-on-year, " said a relevant person.

It is worth noting that in the past five years, the RMB exchange rate against the US dollar has "broken 7" three times. In 2019, 2020, and 2022, the RMB exchange rate against the US dollar has "broken 7" respectively, and returned to the 6 range in the same year.

However, the Fed 's June rate hike meeting has not yet been finalized. Although some Fed officials believe that the June rate hike can be suspended, some officials are worried about persistent inflation in the United States. They prefer to skip a rate hike in June rather than suspend it. Larry Fink, CEO of BlackRock, said that stubborn high inflation will force the Fed to raise interest rates 2 to 4 times.

With the June interest rate meeting outlook uncertain, cross-border sellers should be prepared for exchange rate risk hedging. The best strategy is to collect payments in a timely manner and secure profits when the US dollar exchange rate is relatively good.

In fact, some companies have already planned countermeasures to reduce the impact of exchange rate fluctuations.

Taotao Automobile Industry mentioned in its prospectus that the company's main measures to deal with exchange rate fluctuations include: when the exchange rate of the U.S. dollar against the RMB continues to fall, the company will appropriately increase local sales pricing based on inventory conditions; spot settlement, choosing a period with better foreign exchange prices to settle the exchange; increasing U.S. dollar borrowing, etc.

Huakai Yibai uses its own funds to conduct foreign exchange derivative transactions within the cumulative amount of no more than RMB 150 million to prevent the impact of large exchange rate fluctuations on the company.

Anker continues to carry out foreign exchange hedging business to offset the impact of exchange rate fluctuations. For small and medium-sized sellers, there are more things to consider. Some sellers have given suggestions ↓

If the product is priced in local currency, when the exchange rate fluctuates, the seller needs to adjust the product price accordingly; formulate an exchange rate risk management strategy, use the exchange rate lock function of a third-party payment platform, and automatically withdraw money when the exchange rate reaches a relatively ideal fluctuation peak. You can also reduce costs by diversifying the supply chain and optimizing procurement;

Choose a suitable payment method and understand the fees and exchange rates of different payment methods;

Optimize inventory management, reduce inventory backlogs, and reduce inventory costs;

In the case of tight capital chain, exchange the funds into RMB as soon as possible;

Sellers can choose the appropriate method according to their own situation. However, no matter what strategy is adopted, sellers should pay close attention to exchange rate changes and adjust strategies in time to cope with the impact of exchange rate fluctuations.

exchange rate

Cross-border sellers

Dollar