Start hedging CNY – now

Author: Ashley Lee | Published: 27 Aug 2015

Earlier this month the People’s Bank of China (PBOC) changed the way it calculates the daily fixing rate of the yuan (CNY) against the US dollar. Corporates must now better manage their currency risk.

The PBOC’s change resulted a 3.1% devaluation in the week commencing August 11. That decrease was larger than expected, according to an August 17 Moody’s report. It means that corporates – particularly those borrowing in dollars with CNY-denominated revenues – must be prepared for increasing currency risk.

Market participants are concerned that more volatility could be ahead, while others are already planning to take advantage of...