Spot rate rebounded, is a new dawn for import yarn coming?

Recently, exchange rate of USD against RMB broke through the high point when the BOC raised the deposit reserve ratio for foreign exchange in December last year. On Jan 18, exchange rate of USD against RMB rose to 6.3368 after opening at 6.3459, the highest level since May 2018.

The continuous appreciation of RMB played a certain role in alleviating the price spread between the spot and forward imported yarn. If not taking into account the difference in the actual bank's selling rate and payment period but calculating only on the basis of the middle price, for Chinese traders, Vietnamese carded 32S of $4.1/kg was equal to 29,807yuan/mt CIF, but its RMB price on Jan 7 reached 29,951yuan/mt, that is to say, domestic traders pay less 144 yuan/mt when the other conditions remained unchanged.

Since the appreciation of the RMB, the foreign exchange settlement cost of imported cotton yarn has declined within 100-200yuan. Combined with the recent spot imported yarn price continues to rebound up, so how much impact on the price spread?

The spot prices rose by 300-1,000yuan/mt, superimposing the advantage of the cost of settling foreign exchange, and the price gap narrowed by 400-1,200yuan/mt. But most spots were still 2,000-3,000yuan/mt than the forward. Traders now order forward imported yarn cautiously, the current spot inventory is not high as a whole, and there may be replenishment during the Spring Festival, when imported cotton yarn may rise slightly. The price spread will be lower driven by RMB exchange rate. A new dawn may begin.