The US dollar exchange rate dropped to 7.05, and the seller said it would return to the "6" digit

Yesterday, after the Federal Reserve announced a rate cut, the USD/RMB exchange rate fell again, reaching a low of 7.066.

The US dollar exchange rate is directly positively correlated with the profits of cross-border e-commerce export sellers, so it has always attracted much attention. Recently, the US dollar exchange rate has continued to fall, which has already had a significant impact on the profits of sellers. Yesterday, the Federal Reserve's sudden interest rate cut triggered exchange rate fluctuations, causing sellers to suffer another wave of losses.

Some sellers had previously worried that the US dollar exchange rate would return to the "6" era. Under the influence of this rate cut, this speed is likely to accelerate. And according to relevant news, the Federal Reserve may further cut interest rates by 50 basis points from the current level within this year. In this way, the bottom line of the US dollar exchange rate may be lower than sellers expected.

The US dollar fell as the Federal Reserve cut interest rates

In the early morning of September 19, the Federal Reserve announced a 50 basis point interest rate cut. On the same day, the RMB appreciated significantly, with the offshore RMB appreciating as high as 7.0604 against the U.S. dollar, a significant increase of more than 300 points from the previous day's closing price of 7.0952.

Today ( September 20), the RMB exchange rate against the U.S. dollar continued to appreciate. The spot exchange rate opened at 7.0600 and then broke through this mark to 7.0527, an appreciation of more than 100 points from the previous trading day.

In fact, the US dollar exchange rate had been falling for a long time before the Fed cut interest rates. At the beginning of last month, many cross-border e-commerce sellers had already expressed their feelings about the speed of the US dollar's decline.

“——It was still 7.25 this morning. How could it fall so fast? It’s a tragedy for foreign traders.

——It has fallen so much that I don’t want to talk anymore. The cost of cross-border e-commerce is already very high, and the exchange rate is going to drop again;

——Is the exchange rate about to collapse? I quickly exchanged all my dollars into RMB in the middle of the night, and stored them for paying for peak season goods.”

The dollar exchange rate plummeted to such an extent in a short period of time, which was beyond the expectations of many sellers. According to specific data, on July 29, the RMB exchange rate against the US dollar closed at 7.26, and fell to 7.167 on August 9, a drop of 0.093 in less than half a month. Today, it is only 7.052.

No wonder some sellers lamented that the exchange loss "ate up" his car. This is not an exaggeration. For example, for a million US dollars, the difference between the seller's settlement on July 29 and the settlement on September 20 is nearly 210,000 yuan.

Under the circumstance that the exchange rate continues to fall, those sellers with strong financial strength can indeed hoard US dollars and wait until the exchange rate rises before exchanging them. However, for most cross-border e-commerce sellers, this is not the case.

Since stocking up and paying for shipping costs require a lot of money, most cross-border e-commerce sellers often have a cash flow shortage and it is difficult to hoard US dollars in their accounts for a long time. Therefore, it is wise for them to exchange currency when the exchange rate is at a high point. Once they miss it, they will have to bear a loss.

Every year, cross-border e-commerce sellers lose a lot of money due to exchange rate fluctuations. The impact is even more obvious for big sellers. Last year, Anker Innovations' exchange losses exceeded 32 million, while Silvio and Youkeshu both lost more than 10 million.

The US dollar exchange rate may return to "6" in the short term, and sellers' exchange losses will increase

Economic outlook expectations show that 19 members of the Federal Open Market Committee expect the Fed to cut interest rates further before the end of this year, of which nine expect a 50 basis point cut and seven expect a 25 basis point cut.

Wang Qing, chief macro analyst at Orient Securities, believes that if the Fed cuts interest rates at a faster pace and exceeds market expectations, the U.S. dollar index is likely to fall below 100, and the RMB exchange rate against the U.S. dollar will move closer to 7.0, and it is not ruled out that it may return to the 6-digit range in the short term.

If this is the case, the exchange losses of cross-border e-commerce sellers will be further widened.

However, many sellers believe that there is no need to pay too much attention to the plummeting US dollar exchange rate.

First of all, the rise and fall of exchange rates are mainly affected by market supply and demand, domestic and foreign economic conditions, policy factors and other factors. It is not controlled by sellers, let alone personal will. "If you have time to pay attention to exchange rates, you might as well study how to increase the number of orders," a seller said bluntly.

Secondly, for businesses that have not yet grown to a certain scale, the exchange rate usually does not have much impact on the sellers themselves. One seller joked: "The difference in revenue from daily exchange rate changes may not be as much as the loss from today's advertising."

Another Amazon seller holds the same view. He said that factors such as advertising fees, internal competition among peers, platform policies, and even fluctuations in shipping prices have a much greater impact on sellers than changes in exchange rates. "If the US dollar exchange rate rises, just treat it as a gift from God. If it falls, don't worry too much."

From observation, most sellers believe that large-scale enterprises with large foreign exchange reserves need to pay attention to exchange rates and manage funds. However, for smaller sellers, such as those who only sell dozens of orders a day, there is no need to spend energy to pay attention to exchange rates. When it is time to settle foreign exchange, they can just settle the exchange directly.

"If the profits of your cross-border e-commerce business are greatly affected by exchange rates, or you are very concerned about changes in exchange rates, I think you really need to consider whether your product category is really unsuitable or whether there is something wrong with your operating model," said a senior cross-border seller.

How to reduce exchange losses, see the solution here

Compared with cross-border e-commerce sellers, the decline in the US dollar exchange rate has a greater impact on traditional export-oriented trading companies. For example, a company signed an order worth 1 million US dollars three months ago, and reached a transaction with the customer at an exchange rate of 7.25. When the customer received the goods and paid 90 days later, the US dollar had depreciated to 7.0. The amount of RMB received by the company after the settlement was lower than the amount of the account when the order was signed, which was equivalent to a loss of 250,000 RMB.

So when the exchange rate fluctuates, do cross-border e-commerce sellers /foreign trade companies have any countermeasures to avoid or reduce exchange losses?

To this end, Yien.com has collected and sorted out some solutions:

1. Choose a bank account instead of a payment institution account: Choose an overseas bank account with a corresponding license so that funds can be retained and transferred legally and in compliance with regulations, and you can choose the appropriate time to settle the exchange.

2. Deposit in original currency: To avoid exchange losses during currency conversion, choose services that support withdrawals in original currency to domestic accounts. This can reduce losses when the exchange rate fluctuates drastically.

3. Establish an exchange rate risk management system: For larger enterprises, a special risk management system should be formulated, authorization procedures and authorization limits should be clarified, and norms for risk management business should be established.

4. Use financial instruments to manage exchange rate risk: Hedge exchange rate risk through financial instruments such as foreign exchange forward contracts and options to lock in costs and benefits.

5. Diversified settlement currencies: Use multiple currencies for settlement to diversify exchange rate risks.

6. Improve product price elasticity: adjust product prices according to exchange rate changes to improve price elasticity.

7. Leverage financial technology: Use artificial intelligence and big data analysis to predict exchange rate fluctuations and provide support for decision-making.

Previously, Savitech also shared some of the measures it has taken to deal with exchange rate fluctuation risks in its financial reports, such as strengthening foreign exchange policy research, adjusting the window period for foreign exchange settlement in a timely manner, and studying and using financial derivatives.

US Dollar Exchange Rate

RMB appreciation