New Chinese FX crackdown to hit corporate hedging
Despite new reserve requirement, dealers say ‘maturity’ in risk management is here to stay
Dealers fear a move by the Chinese authorities to reinstate a deposit requirement on foreign currency derivatives could slow a recent pick-up in hedging from local corporates, despite warnings from regulators that firms need to do more to brace for future market volatility.
The People’s Bank of China announced on August 6 that banks must put up a zero-interest, US dollar-denominated deposit at the central bank, representing 20% of the notional value of all new FX forwards, swaps and options
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