RMB Appreciated For More Than Two Months And The Cost Of Imported Cotton Spinning Materials Decreased

The spot exchange rate of RMB rose to a new high of 94.6 US dollars in recent 5 months. Today's middle price rose to 6.9438, nearly 1900 points higher than the May 29 periodic low of 7.1316. Since the end of May and the beginning of June, the RMB exchange rate has continued to strengthen. The main driving factors are the steady recovery of China's economy and the correction of the US dollar index. In addition, the increase of cross-border capital inflow also has a certain impact.

By summarizing the trend of RMB against the US dollar since the outbreak of the Sino US trade war in 2018, we can find that the depreciation of RMB is closely related to the domestic economic situation, Sino US trade negotiations and the trend of US dollar exchange rate (see the figure below). When the domestic economy is blocked and the negotiation situation is unfavorable, RMB generally depreciates; otherwise, it tends to appreciate. Over the past two years, RMB has shown a two-way fluctuation against the U.S. dollar, slightly inclined to devaluation.

With the steady recovery of the domestic economy, the normal implementation of the Sino US economic and trade agreement, and the downward trend of the US dollar exchange rate, it is expected that the RMB appreciation trend will continue for a period of time. It is also not ruled out that before the US election, the pressure of RMB appreciation will rise as the unilateral pressure of the United States on China intensifies.

The appreciation of RMB is more favorable for China's cotton and cotton yarn imports, which can reduce the price of goods quoted in US dollars into RMB, but it is unfavorable to the export of textiles and garments in the same period. It increases the price of RMB quoted goods converted into US dollars and weakens the competitive advantage. Take the appreciation of RMB against the US dollar in the second round as an example. Before and after the appreciation of the exchange rate, the RMB price of the same 70 cents / pound of m-grade imported cotton decreased from 12316 yuan / ton at the end of May to 11997 yuan / ton, saving 319 yuan / ton of import cost; for the same 2.20 US dollars / kg pure cotton 32S imported yarn, the RMB price decreased from 18646 yuan / ton to 18165 yuan / ton, saving 481 yuan / ton, indicating the higher the value of goods The more cost reduction. In the near future, it will be more unfavorable for domestic cotton production if the price of cotton yarn is further increased.