The opportunity to settle foreign exchange has come! The US dollar exchange rate is approaching "7" again

For cross-border e-commerce sellers, what they earn most of the time is the exchange rate difference. Exchange rate fluctuations affect the amount of profit, or even profit or loss.

At the end of February, the US dollar exchange rate saw a surge, reaching 6.97, and many sellers seized this opportunity to convert foreign currency into RMB. As usual, sellers who converted foreign currency in advance were very happy.

However, some sellers are very stable and insist on waiting until the exchange rate breaks "7" before they settle. They believe that under the expectation of the Fed's interest rate hike, the US dollar exchange rate is expected to reach 7.1-7.2. Even after entering March, the exchange rate fell back to 6.9, but their confidence remained unchanged.

As the US dollar exchange rate rises, the logistics costs from China to the United States have also dropped to a very low level. Logistics costs are one of the main costs for sellers, and their decline means that the profit margin will be further expanded.

The US dollar exchange rate rose to 6.9, and sellers were ready to settle their exchange

For cross-border e-commerce sellers, it is necessary to always pay attention to exchange rate changes. After all, exchange rates change very quickly. Once you miss the opportunity to exchange currency, you will lose real money.

Recently , there has been more discussion about the RMB/USD exchange rate in the cross-border circle. The reason is simple: with the expectation of a new round of interest rate hikes, the US dollar has strengthened and sellers have to consider currency exchange again.

Today (March 6), the onshore and offshore RMB exchange rates against the US dollar fluctuated around 6.90. As of 10:00, the onshore RMB exchange rate against the US dollar was 6.9095; the offshore RMB exchange rate against the US dollar was 6.9158.

The People's Bank of China authorizes the China Foreign Exchange Trading Center to announce that the RMB exchange rate midpoint in the interbank foreign exchange market on March 6, 2023 is : 1 US dollar to 6.8951 RMB

Compared with the previous year, the situation has improved a lot. The previous article on the US dollar exchange rate by Yien showed that the central parity rate of RMB against the US dollar on January 10 was 6.7611, which is equivalent to an increase of 0.134 points.

At that time, the sellers who were thinking of "not being leeks, hoarding US dollars, and waiting for the exchange rate to rebound before converting them into RMB" were already celebrating.

Because if the seller has 1 million US dollars in hand, the foreign exchange settlement now will be 134,000 yuan more than that at that time .

However, many sellers said that the current exchange rate has not met expectations, and their goal is to "break 7." Some sellers said that the probability is 7.1-7.2.

In fact, at the end of February, the exchange rate of the US dollar to RMB had reached 6.97, almost touching "7".

However, it suddenly fell back to 6.9 in March. According to analysis, the decline was due to China's PMI exceeding expectations in February, reaching 52.6, a new high since 2012. Driven by the strong PMI, the RMB strengthened.

This wave can be said to have eased the pressure on the US dollar exchange rate to "break 7", but whether the RMB rebound triggered by the PMI data can continue remains a question mark.

The Federal Reserve is on its way to a new round of rate hikes (the ninth one) . Currently, most news from the United States believes that the Federal Reserve will announce a 50 basis point rate hike at the March 21-22 meeting.

For example, Jason Furman, a Harvard University professor and former chief economic adviser to the Obama administration, believes that at the March meeting, the Fed should shift from a 25 basis point rate hike to a 50 basis point rate hike. Former U.S. Treasury Secretary Lawrence Summers also supports the view of resuming a large rate hike , suggesting that the Fed should open the door to a 50 basis point rate hike.

Driven by expectations of interest rate hikes, it is not completely impossible for the US dollar exchange rate to "break 7", so sellers who have US dollars in hand can prepare for foreign exchange settlement and take action when the time is right.

If you are waiting for funds to turn around, you can also consider converting foreign currency now. After all, 6.9 is also a very good position.

As the US dollar exchange rate increases, the reduction in logistics costs is also beneficial to sellers.

Freight rates remain low, and sellers' profit margins expand

Previously, sellers have witnessed the "skyrocketing" cross-border logistics freight rates . At the craziest time, the price of transporting a 40-foot container from China to the West Coast of the United States rose to US$20,000.

After 2022, freight rates gradually declined, and in the second half of the year they had basically dropped to the pre-epidemic level (US$1,500). In 2023, freight rates continued to fall.

The cost of temporarily shipping a standard 40-foot steel container from eastern China to the U.S. West Coast was $1,444 in February, down from a peak of $9,682 in March last year, according to shipping data specialist Xeneta.

It is reported that with the reduction of consumer spending due to inflation and the easing of the supply chain disruption crisis caused by the epidemic, the price of transporting goods on important global trade routes has fallen by 85% from its peak.

While freight rates have dropped significantly , ports have also undergone tremendous changes.

A year ago, there were more than 100 ships waiting to unload outside the ports of Los Angeles and Long Beach . But now, there are almost no container ships waiting in line in San Pedro Bay. Goldman Sachs reported that the number of container ships waiting to unload on the West Coast of the United States has remained at zero for the twelfth consecutive week.

The situation of "it's hard to get a container" is gone forever . Instead, the ports are filled with empty containers. Some ports in the United States are even stacked six stories high. The highways leading to the main ports are filled with trucks without cargo.

Due to the sharp drop in cargo volume, shipping companies were forced to reduce flights or suspend operations. Some small ship companies that lost their competitive advantage went bankrupt under the heavy pressure.

According to Reuters, in January this year, the Port of Los Angeles reported 17 canceled voyages. In February, Australian shipping company Focus Container Line entered bankruptcy liquidation, just one year after its establishment and only three months after the opening of the route from Australia to Ningbo, China.

Also in February, ZIM, a shipping company familiar to sellers, announced that it would suspend service on its ZEX route after February 23.

Falling freight rates and reduced cargo volumes have made competition among logistics service providers even more intense.

Not long ago, a logistics professional complained to Yien that now in order to attract cargo, everyone is competing to lower prices. They can only make a profit of US$20 for a cabinet. If it is a door-to-door order, if there is a dispute over waiting time abroad, there is a high probability that they will lose money.

A freight forwarder said helplessly: "Working part-time as a food deliveryman, the commission is much higher than earning from a single order. Because of poor performance, colleagues around me come and go, or are laid off. The turnover is very high."

Although the current freight market has put pressure on logistics service providers, on the other hand, it is good for cross-border e-commerce sellers. Because logistics costs account for a large proportion of the seller's total costs, a sharp decline in logistics costs is equivalent to expanding the seller's profit margin.

However, logistics service providers do not need to be too discouraged, because the freight market will recover in the second half of this year. MSC, a shipping company known as a barometer of global trade , said that the shipping container market will grow in the second half of 2023.

Its CEO, Soren Toft, said they are moderately optimistic about the recovery of the freight market. He believes that by the middle of this year, trade activities will be active again. "In the second quarter and into the middle of the year, we will start to see some positive signs. Although inventories in North America and Europe are still too high, once inventories are gradually reduced, freight orders will rebound."

This also gives sellers confidence.

US Dollar Exchange Rate