The US dollar is falling! What impact does it have on cross-border sellers?

The US dollar has been falling for a long time recently, and it is not a simple up and down fluctuation, but a real decline. Many sellers who have withdrawn money recently have begun to pay attention to this problem.

At the end of May, the USD/RMB exchange rate was still hovering above 7.1. Since entering June, the USD exchange rate has been falling wildly and has now fallen to around 6.82.

This is equivalent to a store balance of 10,000 US dollars. If you withdraw money now, you will get 3,000 less than in May. If the store balance is larger, the loss will be doubled.

You should know that the US dollar exchange rate was not so low when the epidemic in the United States was at its worst in March and April. What happened recently that affected the US dollar exchange rate?

In the first half of this year, when the U.S. stock market had five circuit breakers, the Federal Reserve directly announced the launch of unlimited QE (balance sheet expansion) in order to save the market. In other words, the Federal Reserve can now print unlimited money to save the U.S. stock market from falling.

The U.S. stock market has been saved and has returned to a level similar to that before the epidemic. Amazon even broke the historical market value record. The Fed's unlimited money printing is indeed overbearing.

However, the consequence of printing money is of course inflation and currency depreciation. Although the unlimited QE did not cause a big fluctuation in the US dollar exchange rate at that time, it was essentially due to the time lag between policy implementation and seeing the effect. Now that the US stock market has recovered, the damage of printing money to the US dollar exchange rate has begun to show.

If there are sellers who care about the U.S. stock market, they can clearly see that the U.S. stock market also started a rising cycle around the end of May and the beginning of June, which coincides with the period when the U.S. dollar began to fall.

The relationship between the US stock market and the US dollar is complicated. When the stock market is booming, hot money will flow into the stock market, causing the US bond and US dollar exchange rates to fall. Therefore, it usually manifests itself as a rise in US stocks and a fall in the US dollar exchange rate.

In fact, this is the most fundamental problem. The number of infections in the United States has now exceeded 6 million and is heading straight for 7 million. It is estimated that this number will be reached before Prime Day in early October. The level of 30,000 to 60,000 new confirmed cases per day has reached or even exceeded the most serious level in March and April at the beginning of the year.

The impact of the epidemic on the economy is very obvious. Coupled with social unrest, various black demonstrations have seriously damaged the US economy. In addition, the US is about to face the general election in November. Because the general election will bring too much uncertainty to the US economy and politics, the US dollar exchange rate usually weakens for a period of time before the general election in previous years.

Moreover, Trump has used the rise of the U.S. stock market as one of his few political achievements to strive for re-election. In order to stabilize the high level of the U.S. stock market, he will not care about the exchange rate, which has also indirectly hit the U.S. dollar exchange rate.

The above factors have led to the recent decline in the US dollar exchange rate. The recent decline is just the beginning. Foreign exchange management company AGBisset predicts that the US dollar may usher in a long-term decline. The RMB exchange rate against the US dollar may return to the level before the trade friction in 2018.

So what impact will this sharp drop in the US dollar exchange rate have on us cross-border people?

The decline in the US dollar exchange rate is mainly beneficial to import sellers, overseas students and overseas shopping buyers, as their shopping costs will certainly be much lower. However, for us cross-border sellers, the negative impact is still the main one.

The most obvious impact is that the income from converting the foreign currency and US dollars we earn into RMB has decreased, and all other negative effects can be attributed to this. The example at the beginning of the article can illustrate this point very well. The difference between withdrawing 10,000 US dollars in May and withdrawing 10,000 US dollars in July is 3,000 yuan, and this gap may widen in the future.

However, cross-border sellers have always been one of the most resilient groups. No matter how unfavorable the external policies and trends are to our operations, we can try to minimize or divert these problems.

For example, with the recent fall in the US dollar exchange rate, we can change our thinking. If we spend the money without converting it into RMB, wouldn’t it have less impact? For example, Amazon’s official logistics service can directly deduct the first-leg freight from the account balance, which saves the exchange rate exchange process and can also solve the current problem of goods entering the warehouse and putting them on the shelves. It can be said to kill two birds with one stone.

In general, the decline in exchange rates has a significant impact on us, but there are also various ways to transfer these losses.