In the context of higher-than-expected inflation, the Federal Reserve announced an interest rate hike of 75 basis points (the federal funds target interest rate range) in the early morning of June 16, 2022, Beijing time. to 1.5%-1.75%), the largest rate increase in 28 years. The interest rate hike has caused a series of chain reactions. Today I will focus on the exchange rate.
Textile people engaged in foreign trade all know that stable exchange rates are very important for export business, but the Federal Reserve’s interest rate hikes have a huge impact on the global exchange rate.
Raising interest rates: somewhat similar to attracting savings at high interest rates
Although it seems that the interest rate of 1.5% is not high, it is only a one-year interest rate. The multi-year interest rate needs to be calculated using an index. If it is 10The yield on Treasury bonds has increased by more than10%, and the credit rating of U.S. debt is extremely high. Such a high An increase in yields will naturally attract a large amount of capital.
In order to prevent a large amount of capital from flowing out, affecting the normal development of domestic industries and causing huge fluctuations in exchange rates, central banks in various countries often adopt the same method of raising interest rates. It is also easy to understand that the interest rate of the bank next door has become higher. In order to prevent the deposits in your bank from flowing through, you can only increase your own interest rate.
So we can see thatAt present, all countries in the U.S. dollar index basket of currencies except Japan have basically raised interest rates. Looking at last week, 7 central banks (except the Federal Reserve) chose to raise interest rates in just one week, while the European Central Bank 6An emergency meeting was held on the 15th of September. At the meeting, the borrowing cost control plan for the southern part of the euro zone was adopted so that it could be completed on 7 Interest rates will be raised in September and September.
Then the yen began to collapse…
Japan: Raise interest rates, I can’t do it
In order to maintain high domestic welfare in Japan, a large amount of government spending is required. However, due to the lack of new growth points in the economy, the manufacturing industry has gradually been replaced by countries such as South Korea and China. Exports have been severely hit. They can only rely on debt to survive, and the debt is not yet available. Borrowing new debt to repay old debt. In order to continue this cycle, we can only maintain long-term low interest rates or even negative interest rates. (The negative 1% interest rate is equivalent to the government borrowing 100 yuan to pay back only 99 span>yuan)
Because Japan invests in many industries abroad, it needs to maintain high liquidity, and the Japanese yen can be freely converted into the U.S. dollar. In normal times, the United States relies on printing US dollars to harvest the world, and the Japanese yen can also take a sip of soup with the United States.
As soon as the Federal Reserve raises interest rates, the interest rate on U.S. dollars increases. Then financial institutions lend Japanese yen to buy U.S. dollars and hedge the interest rate difference between Japanese yen and U.S. dollars. To ensure the creditworthiness of Japanese yen debt, Japanese financial institutions have to Let others borrow it, and then international institutions conduct arbitrage operations on a large scale, which ultimately leads to the depreciation of the yen.
If you want to stop this trend, you can either reduce liquidity and prevent others from borrowing money. However, this will not work. In the future, Japanese bonds will not be sold, and the government may go bankrupt without money; or you can raise interest rates and borrow so much money. , once the interest is added, even the interest cannot be paid, and the government directly goes bankrupt.
Everyone on the left and right is dead. There is nothing we can do, and Japan can only lie flat. The Bank of Japan announced on Friday that it would maintain ultra-low interest rates and vowed to defend its cap on bond yields through unlimited purchases against a wave of global monetary tightening.
Today, the yen is hovering near the 24 year low against the US dollar, with the USD/JPY exchange rate at 1USD/USD 135.07Japanese yen.
Is depreciation good for exports? False proposition
According to general thinking, devaluation is beneficial to exports, but this is not the case for manufacturing countries that lack resources.
The reason is also very simple. The manufacturing industry needs resources to produce goods, and the import of resources requires foreign exchange. Recently, the price of raw materials has put great pressure on the textile industry. Think about it if the exchange rate depreciates at this time, bulk commodities such as crude oil will often They are also priced in US dollars. To what extent will the cost rise?It’s scary to think about.
But if the cost increases, can the selling price increase? The answer is often no. Except for a small number of independent businesses, sellers of most commodities do not have pricing power. When the exchange rate is low, buyers will lower prices, ultimately causing a national export deficit. As far as Japan is concerned, if the prices of exported products are increased a lot, their counterparts in China, South Korea, Germany, and the United States can completely defeat Japan’s industry in a matter of minutes.
One wave has not subsided yet, another wave is coming
However, the Fed’s interest rate hikes look to be just the beginning.
As ofOn June 20, the Federal Reserve held its July policy meeting The probability of raising interest rates by 75 basis points is as high as 99.5%, and the probability of raising interest rates by 100 The probability of basis points is 0.5%, while the rate hike is 25 and The probability of span>50 basis points is 0%.
Traders expect the probability that the Fed will raise interest rates again in July by 75 basis points is higher than 90%; in the future3 months the rate of interest rate hikes will reach 2 percentage points, the most aggressive stance on raising interest rates since 1982.
If Japan continues to remain flat by then, God knows how far the exchange rate will fall.
Impact on Chinese textile enterprises
The impact of the Federal Reserve’s interest rate hike on Chinese textile companies is mainly reflected in two aspects, one is the RMB exchange rate, and the other is the price of bulk raw materials.
RMB exchange rate
Compared with the Japanese yen exchange rate, the RMB does not carry such a large debt burden, so the exchange rate can basically remain stable. Although there will be certain fluctuations due to this year’s epidemic and the poor global economic environment, the fluctuations The scope is basically controllable, there will be no “roller coaster” situation, and the impact on foreign trade exports is relatively limited.
Price of bulk raw materials
Compared with exchange rate fluctuations, changes in raw material prices will have a greater impact. The impact of the Federal Reserve’s interest rate hike on crude oil prices can be said to be immediate. Currently, international oil prices have dropped from more than 120USD to less than 110US dollars, the price of polyester filament has also dropped by almost 300 yuan/ tons. If the Federal Reserve raises interest rates again and oil prices continue to fall, there is a chance that the price of polyester raw materials will continue to fall.
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