Offshore RMB hedging costs soar as CNY/CNH basis hits record

Corporates "don't have a choice" about hedging

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Continued downward pressure on the renminbi against the US dollar has driven hedging costs up massively in the offshore market as tight liquidity drives a record basis between the offshore (CNH) and onshore renminbi (CNY) forward rates. Despite these rising costs, China corporates continue to hedge offshore as the CNH market is the only way to risk-manage their US dollar borrowing exposures.

"We see very active demand for CNH hedging by corporates," says Simon Lau, head of rates, foreign exchang

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