THE EXCHANGE RATE FOR USD AND RMB

- Aug 31, 2019-

On August 26, the onshore renminbi jumped low against the US dollar, falling more than 600 points and falling below the 7.14 pass. At the same time, the offshore renminbi fell by about 300 points against the US dollar and recovered the 7.17 pass. As of 9:45, onshore and offshore renminbi were reported at 7.1445 and 7.1650 respectively.

On the same day, the renminbi rose 2 basis points to 7.0570 against the dollar.

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Did the tradesman laugh?

The devaluation of the renminbi means that positive foreign trade, positive exports, to some extent offset the point of higher tariff sales pressure. Devaluation has certain benefits for export-oriented enterprises, especially small manufacturing industries. On the one hand, devaluation of the renminbi is conducive to companies to reduce costs and improve product competitiveness. Enterprises will receive more orders; On the other hand, it is beneficial to export enterprises to obtain exchange gains. The devaluation of the renminbi means that foreign currencies have greater purchasing power, which will further stimulate consumption and facilitate exports. However, how many customers are willing to pay?

 

Impact on import-export enterprises?

In theory, the depreciation of the exchange rate will increase the competitiveness of domestic exports, but in fact, the impact of devaluation on foreign trade enterprises is more subtle, not entirely positive pull effect.

The renminbi has weakened against the dollar, and while the competitiveness of corporate exports has increased, expectations that the renminbi will continue to depreciate in the future have a negative impact on business.

 

"The devaluation has increased the competitiveness of exports, but it has also left overseas customers hesitant to place orders and they think the yuan will continue to devalue," said the head of a company engaged in export trade. This also extended the order time, affecting the transaction value. "

At the same time, there is also a certain impact on imports. An enterprise engaged in the import of electrical appliances said: "Now we must quickly order and quickly settle the bill. In general, we will bring the goods in within a month. It will not take too long. If we delay too long, we will have too much difference with the exchange rate when signing the contract. If the delivery period is too long, we will have to make up the difference after devaluation. "

 

Under such circumstances, how should foreign trade enterprises operate to avoid the risk of exchange rate fluctuations?

In the current environment, exporting companies need to have two skills:

One is pricing skills, with good pricing skills;

The second is exchange rate risk management skills, learning to use some management tools to reduce risk. In fact, the smaller the company, the less attention it pays to foreign exchange risk, and they have no profit to spend on hedging risk. Therefore, once the risk occurs, the greater the impact will be, and a vicious circle will form.