How does exchange rate affect foreign trade?
China's currency: Inflation vs. Trump 2.0
Yesterday, the onshore RMB/US dollar closed at 7.1603 at 16:30 on November 7, up 46 points from the previous trading day.
[Important information] The Federal Reserve announced a rate cut of 25 basis points, reducing the target range of the federal funds rate to 4.5% to 4.75%, the second rate cut this year, in line with market expectations. How will it affect foreign trade exports? What is the impact on rare metal materials, tungsten electrodes, tungsten rods, tungsten alloy products?
Combined with the current status of the "Trump trade" and the historical trend pattern of the US dollar index in the second stage of the "US presidential election", we believe that the possibility of the US dollar index continuing the previous trading characteristics is relatively limited, which is similar to the situation in 2020, 2012 and so on. Therefore, in the benchmark case, it is expected that the strength of the short-term US dollar index will be maintained, but the sustainability is doubtful (mainly based on the considerations of the US economy), so the depreciation pressure on the renminbi may be short-term. At the same time, we speculate that Trump's China policy may not fully repeat the strategy of the first term, and may delay the implementation of the policy in terms of intensity and priority, which may ease the depreciation pressure on the RMB. For foreign customers to purchase tungsten raw materials, tungsten electrode, tungsten molybdenum alloy material is favorable. However, if Trump imposes tariffs aggressively in 2024 in advance, it will probably bring greater depreciation pressure on the RMB, but it is necessary to pay close attention to the attitude of the Chinese central bank on the exchange rate and possible intervention measures.
[Risk warning] Domestic political conflict in the United States
