PBoC reserve ratio cut spurs short-term FX hedging
Removal of 20% forex risk rule drives exporters towards options and onshore forwards
The People’s Bank of China’s decision to scrap its 20% foreign exchange risk reserve requirement has triggered a pick-up in short-term hedging activity among corporates, although dealers say the move is unlikely to shift medium-term positioning while the interest rate differential between US dollar and renminbi rates persists.
The PBoC announced on February 27 that it would reduce the reserve
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