Chinese corporate hedging costs soar after PBoC forex clampdown

peoples-bank-of-china-new — PBoC: new rule requires a deposit against forex derivatives

- Catherine Contiguglia, Xiao Wang, Risk
- 01 Oct 2015

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Chinese corporates scrambling to cover their US dollar exposures after a surprise devaluation by the country's central bank last month are facing a spike in hedging costs as a result of a new requirement for banks to hold a deposit against foreign exchange derivatives transactions.

The People's Bank of China (PBoC) devalued the renminbi by 1.9% against the dollar on August 11, causing the dollar/renminbi exchange rate to rise by 4% in two days. To minimise speculative trading following the

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