The plunge in the yuan last month spurred some Chinese exporters to reduce their currency hedges amid bets weakness would continue, some traders commented.
Companies lowered their hedging ratios last month, becoming reluctant to sell dollar forward contracts, said the same traders. The traders cited flows they handled on behalf of corporate clients.
While a weaker yuan translates into higher profits for Chinese exporters, currency hedges from some companies limited the benefit to earnings last month. The yuan weakened past seven for the first time in more than a decade as trade tensions worsened to cap a record 4% loss for the month. It has risen 0.7% in September.
Chinese companies sold more dollars using forwards than they bought for 11 months through July, according to State Administration of Foreign Exchange of China data. Figures for August are due 19 September. – Bloomberg News.
The US Dollar Index (DXY) rose 0.05% to USD98.33 on Tuesday (10 September), the pound climbed 0.03% to USD1.2350, and the euro fell 0.05% to USD1.1043. The yen declined 0.28% to 107.54 per dollar.
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