As the US dollar exchange rate rises, can it return to the "7" era?

On March 1, the central parity rate of RMB against the US dollar was 6.3016 yuan. On April 22, the onshore RMB against the US dollar fell below the 6.5 mark, reaching a low of 6.5068, and the offshore RMB against the US dollar reached 6.5464. The US dollar exchange rate has risen to its highest level in six months. Should sellers exchange currency quickly or wait?

What cross-border sellers are most concerned about recently is the exchange rate fluctuations in recent days, especially the rise in the US dollar exchange rate. For sellers who mainly focus on the US market, it will have a greater impact on their profits.

Since the first quarter of 2022, the RMB exchange rate against the US dollar has generally shown a trend of "first appreciation, then depreciation, and two-way fluctuations". It is understood that the exchange rate fluctuations are mainly affected by multiple factors such as the situation of the Russian-Ukrainian war, the Federal Reserve's interest rate hike, global inflation, and the stable start of my country's foreign trade.

The US dollar exchange rate broke 6.50, reaching a six-month high

From April 20, the exchange rate of the US dollar against the RMB began to rise. On April 21, the onshore RMB against the US dollar closed at 6.4506 yuan. On April 22, the onshore RMB against the US dollar broke through 6.50 yuan, reaching a high of 6.5050 yuan, the highest since November 2021.

Although the US dollar exchange rate has broken the highest level in nearly six months, sellers have different attitudes towards currency exchange:

"The exchange rate has risen sharply, quickly convert the currency!"

“Don’t withdraw money from now on, it’s expected to rise further!”

"Wait a little longer, when it goes up to 7, just lie flat!"

A service provider said that due to the rise in the US dollar exchange rate, it helped several companies settle 15 foreign exchange transactions in one afternoon...

It is understood that since October last year, the US dollar exchange rate has been on a downward trend, especially at the beginning of this year, the US dollar exchange rate fell to 6.3. For sellers with larger volumes, the profit loss overnight may reach tens of thousands or even more just due to the decline in the exchange rate. Taking Chuangyuan Co., Ltd. as an example, due to the impact of exchange rate fluctuations, the exchange loss in 2021 reached nearly 10 million yuan, accounting for 174.61% of the total profit for the period!

The US dollar exchange rate has risen and the RMB has depreciated. What will be the exchange rate trend in the future? CITIC Securities pointed out that the pressure on the RMB exchange rate to depreciate has increased recently and may continue for some time. This is mainly affected by two factors. First, the economic fundamentals have declined due to the epidemic, especially the rapid spread of this round of epidemic, which has caused global concerns about China's supply chain. Second, the strengthening of the US dollar, the tighter monetary policy of the Federal Reserve, and the stronger US economy than other countries have supported the rise of the US dollar.

Some analysts also pointed out that the RMB may be under pressure in the short term, but two-way fluctuations will remain the norm for the RMB exchange rate.

Platform fees are rising, and sellers’ profit margins are being squeezed

In addition to exchange rate fluctuations, in the first half of this year, the repeated outbreaks of the epidemic, the turbulent international situation, the record highs of inflation in many overseas countries, and the tightening of monetary policy have further reduced the demand of overseas consumers. Coupled with the increase in various fees of e-commerce platforms, all have had an impact on the sales and profits of cross-border sellers to a certain extent.

Not long ago, Amazon announced that it would increase inflation and fuel surcharges on its US and European sites. In fact, Amazon had already raised commissions and FBA delivery fees on its US site in January this year, and FBA delivery fees on its European site also went through a round of increases at the end of March. The platform fees increased twice within three months, and many sellers complained that they were being ripped off by the platform.

Although platform fees have increased, sellers are afraid to follow suit. Due to the number of orders and inventory pressure, most sellers remain cautious about "raising prices".

In addition to Amazon, major e-commerce platforms have recently begun to require sellers in Germany and France to register for EPR. For sellers operating these two sites, additional expenses will be incurred.

Fortunately, since the first half of the year, the rise in ocean freight has been curbed, and the sellers' first-mile costs have been somewhat eased. However, due to the ongoing conflict between Russia and Ukraine and rising oil prices, express delivery companies such as FedEx and UPS have already imposed new surcharges due to oil prices and inflation. Recently, several international shipping companies have also announced that they will increase the comprehensive rate surcharge for Asia-US routes starting May 1.

Industry insiders said that as the epidemic eases, sellers' shipments will continue to increase, and coupled with the collection of comprehensive rate surcharges, ocean freight in May may see a wave of increases......

Sellers going overseas need to save costs in many ways

The increase in platform fees, freight and other costs has further squeezed the profit margins of sellers. However, these cost increases are not within controllable range, and sellers still need to control costs in other aspects to expand profit margins. This requires sellers to be more refined in operations, such as managing their inventory reasonably and choosing relatively favorable carton and container sizes.

Compared with the above points, the cost of cross-border payment is a factor that is easily overlooked by sellers. In addition to exchange losses, in the cross-border capital flow, from receiving payment to withdrawing cash to domestic personal accounts, and then paying international fees through personal accounts, the fees required for each link in the middle will also affect the seller's profits. By using a cross-border payment solution that integrates collection, management, and payment, sellers can save costs, reduce the burden on profits, and greatly improve payment timeliness.

The editor learned that recently, Airwallex has upgraded its entire product line, continuously optimized its full-link cross-border payment products, and improved the payment experience of sellers:

【Collection】Added local payment in Canada and Singapore , supporting 11+ mainstream currencies in total; payment collection is officially connected to SHOPLINE , and will soon be connected to mainstream website building platforms such as Shopify , providing sellers with a smooth online payment experience; sellers can also flexibly create payment links , and can realize fast payment without development.

[Management] The account group function will be launched soon, which will support sellers to manage finances across countries and business lines, realize centralized management of multiple accounts, and control the funds and transactions of multiple accounts at the same time.

【Payment】Added international payment capabilities in the Middle East and North Africa . Yunhui Visa Card has launched a new physical card, which can connect all online and offline payment scenarios, solving platform store rental, advertising, overseas procurement, third-party supplier payment and other needs.

Airwallex also provides a one-stop payment collection solution for global sellers. With just one connection, you can quickly access bank card payments and multiple local payment methods, seamlessly connect currency exchange and global payments. Thanks to the global payment network, powerful foreign exchange engine and real-time exchange rate locking, it can significantly reduce exchange losses for sellers.

At the same time, Airwallex has recently launched a limited-time promotion for cross-border sellers. During the promotion period, new users can enjoy 0-fee cash withdrawals for 365 days a year (limited to a cash withdrawal amount of no more than RMB 1,008,800), and can also open an Airwallex Visa card for 0 yuan . When using the Airwallex Visa card to meet a certain amount of international transactions, you can get a cashback of up to 1.6% . At the same time, Airwallex has also joined hands with a number of high-quality cross-border service providers to provide sellers with a cross-border ecological gift package .

Scan the QR code on the poster below to experience limited-time discount benefits immediately and enjoy global one-stop payment and collection!

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