The US dollar exchange rate plummeted to 6.76! Sellers: The loss from the exchange is enough to buy a BMW

At the beginning of 2023, the exchange rate gave cross-border e-commerce sellers a sharp drop as a gift, and many people were caught off guard.

The cross-border e-commerce industry has been flooded with news about the falling US dollar exchange rate in recent days. The cross-border e-commerce industry pays more attention to exchange rate changes than any other industry, because it is directly related to the profits of sellers.

I still remember that at the end of August 2022, sellers were still confidently waiting for the US dollar exchange rate to break "7". In the end, it did not disappoint everyone. The US dollar exchange rate went up all the way and reached a maximum of 7.3. Although it did not reach 7.5 as some sellers expected, it also made the sellers' profits much more substantial.

However, after entering December, the US dollar exchange rate took a sharp turn downward, falling all the way to 6.7, a drop of nearly 6 points. Sellers who missed the best time to exchange currency were beating their chests and stamping their feet. The US dollar exchange rate dealt a heavy blow to sellers before the Spring Festival.

The US dollar exchange rate fell to 6.76, and the exchange loss was enough to make sellers suffer.

Yesterday ( January 9), after breaking through the 6.90 mark on the first trading day of this year, both onshore and offshore RMB exchange rates against the US dollar broke through the 6.80 mark.

The spot exchange rate of RMB against the US dollar opened at 6.8150, and then rose above the 6.81 and 6.80 levels. Wind data showed that as of the close of the day, the onshore RMB exchange rate against the US dollar closed at 6.7712, rising to a high of 6.7592 during the session, a new high since August 16, 2022.

Data from the China Foreign Exchange Trading Center showed that today ( January 10), the central parity rate of the RMB against the US dollar was 6.7611, up 654 basis points from the previous trading day. The previous trading day, the central parity rate of the RMB against the US dollar was 6.8265.

The RMB is soaring, some are happy and some are sad. Import cross-border e-commerce companies are happy, but the pressure is on foreign trade companies including export cross-border e-commerce sellers. The RMB is soaring, which means that the US dollar exchange rate is falling. For this reason, sellers are extremely frustrated and depressed recently:

"——The profits are already lost while the cargo is still floating on the sea;

——The current exchange rate is really sad and makes people cry;

——I originally wanted to wait for a small rebound to settle the exchange, but it turned out that there was no chance at all;

——The exchange rate kept falling, and my blood pressure kept soaring;

——When it was at its peak, I thought I’d wait a little longer, but in the end, I overestimated it.”

The dollar exchange rate has plummeted to such an extent in more than a month, which is beyond the expectations of many people. Now those sellers who still have dollars in their hands and missed the exchange rate high point can only beat their chests and stamp their feet.

Taking 1 million US dollars as an example, the seller settled the currency at 7.3 and 6.76, with a difference of 540,000 yuan, which is a huge loss.

Especially those sellers who have not yet settled the payment received during the peak season of November and December are vomiting blood. And those sellers who rely heavily on sales in the fourth quarter, where peak season sales account for a relatively high proportion of annual sales, have already fainted in the toilet.

Sellers have no control over the rise and fall of exchange rates, just as they know that the RMB will strengthen at the end of each year and they can only accept it silently. One foreign trade seller said that the losses caused by the appreciation of the RMB at the end of the year in recent years could buy him a BMW.

Many sellers said that the appreciation of the RMB before the New Year is a common practice and there is no need to rush because it will fall back after the New Year. They believe that the US dollar exchange rate will rebound in February and March. Some sellers even boldly said that it will return to "7" in March.

Based on this, many people are hesitating between "quickly convert the foreign exchange before it falls to the lowest point" and "hoarding and waiting for a rebound before converting the foreign exchange, and not being fooled now".

However, will the exchange rate really develop as the sellers expect?

The RMB is strong and the overall weakness of the US dollar will continue for half a year

A senior person in the cross-border e-commerce industry analyzed that based on the domestic and US situations, the US dollar exchange rate will most likely continue to fall.

Wang Qing, chief macro analyst at Orient Securities, predicts that the central value of the RMB exchange rate against the US dollar is expected to rise by about 5% from the current level in 2023, reaching around 6.6.

From the source point of view, this wave of decline in the US dollar exchange rate is mainly due to two reasons. On the one hand, the US economic recession in 2023, coupled with the rising expectations of the Federal Reserve's interest rate cuts. On the other hand, the domestic restrictions on the COVID-19 epidemic have been relaxed, and expectations for economic recovery have increased.

The United States experienced an unprecedented rate of interest rate hikes in 2022. Starting in March, the Federal Reserve raised interest rates seven times in 2022, a total of 425 basis points, and eventually raised the target range of the federal funds rate to 4.25%-4.50%, reaching the highest level since the 2008 international financial crisis.

Although the Fed hinted that it will continue to raise interest rates in the new year, the pace has slowed down. Fed officials have hinted that the rate hike may only be 25 basis points in January. At the same time, futures traders expect the Fed to raise interest rates by only 25 basis points in February. This is much less than the 50 or 75 basis point rate hikes in 2022, proving that the Fed's tightening policy is coming to an end.

In terms of economy, the economic situation in the United States in 2023 is not optimistic, and the shadow of economic recession looms. The forecast of the key term spread model of U.S. Treasury bonds (Bloomberg model) shows that the probability of a recession in the United States in 2023 is close to 100%. The well-known think tank Peterson Institute for International Economics also previously predicted that the U.S. economy will shrink by 0.5% in 2023, and the latest forecast of Bank of America shows that the U.S. economy may start to decline from the first quarter of 2023.

Affected by these two factors, the US dollar exchange rate lacks upward momentum. Zhou Hao, chief economist of Guotai Junan International, said that the overall weakness of the US dollar will continue at least until the first half of 2023.

On the other hand, China has already lifted restrictions due to the COVID-19 pandemic. According to foreign experience, the economy has recovered after the pandemic was lifted. In addition, China has lifted entry restrictions since January 8, and the economy is expected to rebound, and the prospect of overseas capital inflows has increased. All of these will support the appreciation of the RMB.

“We believe that China’s economic recovery will become more evident in 2023, especially after the second quarter,” said Gao Ting, chief strategist at Nomura Orient International Securities Research.

According to the above analysis, it can be predicted that the weakening of the US dollar is a high probability event, and it will last for a long time. According to past experience, the RMB will depreciate after the New Year, but this year the situation is obviously different. Therefore, the sellers expect that the US dollar exchange rate will rebound in February and March. Under the influence of the interest rate hike, there may be a slight increase, but the hope of reaching "7" is likely to be dashed.

In view of this, sellers must consider their own business conditions when exchanging foreign exchange. Yien believes that whether it is now or in the future, batch settlement may be a more secure way for sellers. It should be noted that you must overcome the "greed" mentality, which has also been mentioned in previous articles. Don't try to earn the last penny, because it is very likely that you will miss the opportunity and end up with greater losses, which is not worth the loss.

US Dollar Exchange Rate