China derivatives appetite set to grow as PBoC lifts deposit rule

Central bank rule change could cut hedging costs by up to 100bp, traders say

peoples-bank-of-china-new

Traders are expecting increased interest in Chinese renminbi foreign exchange forwards following the decision to remove a reserve requirement ratio for financial institutions by the country’s central bank. 

Worried by the soaring renminbi, on October 10 the People’s Bank of China (PBoC) announced it would scrap the FX risk reserve ratio it implemented in 2018 to curb speculation against the currency. 

Under the rule, financial institutions had to set aside 20% of the previous month’s renminbi

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