Chinese corporate hedging costs soar after PBoC forex clampdown
New rule leads to 400bp price hikes as companies hedge renminbi fall
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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