Surprise renminbi strengthening prompts unwinds
“A lot of long [US$] positions were unsustainable and had to be re-evaluated,” says FX structuring head
A surprise move by the People’s Bank of China (PBoC) to step in and strengthen the local currency has left speculators scrambling to unwind their long US dollar positions and prompted a renewed appetite for hedging among the country’s onshore exporters, who previously chose not to protect themselves against a weaker dollar.
The USD/CNH rate fell from 6.87 on May 23 to a low of 6.72 on June 1, following Moody’s decision to cut the country’s credit rating. This led to a surge in USD/RMB futures
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