Source: Bloomberg
Author: George Lei
As the world's second largest economy is ready to end the one -week Spring Festival holiday, investors are searching for cheap tools for hedging the risk of devaluation in RMB.With the implicit volatility of all periods, it has dropped to the lowest since 2022. In order to hedge the risk of depreciation of the RMB, options have become the most cost -effective tool.
For offshore RMB, the short -term hidden volatility indicator has been declining since the top 2022 has been in the top 2022.The implicit volatility of 1 month and three months is currently at a low point or nearly two years, which means that option buyers can get low -cost protection.9 months of implicit volatility -the term covers the US presidential election on November 5 -the decline is less than short -end varieties.However, this indicator is currently around 5.3%, close to the level before the fluctuation rate of August 2022.
"At present, all political scores have to be attacked by China," Spectra FX Solutions LLC President Brent Donnellly, a senior foreign exchange trader who worked in HSBC, Citi, and Nomura.At the beginning of February, when the US dollar/offshore RMB was reported at 7.2250, he recommended the customer's USD/offshore RMB execution price at a one -year bullish period of 7.60 -no matter who won in November, this low -cost hedge may be effective.He added that China's own economic problems have also caused the renminbi to fall into trouble.
Kiyong Seong, a strategist in French Industrial Bank, coincides with Donneelly. It tells customers that they use the price of "many years low" to buy a three -month US dollar/offshore RMB risk reversal and hedge the risk of depreciation.The bank said that the low volatility of the RMB mainly originated from the central price of the People's Bank of China in the past few months.Seong pointed out that the RMB transaction price can fluctuate within 2%of the middle price of the day. If the renminbi will break through the weak end of the interval 7.25, the central bank will "inevitably" weaken the middle price."The subsequent pessimistic market response will be very strong, pushing the US dollar/offshore RMB to 7.30-7.35."
The latest US data also highlights the lingering price pressure, making the Fed's hope of cutting interest rates in the first half of 2024, and increasing the pressure of the RMB depreciation.Citi Group, French Industrial Bank, and former US Treasury Secretary Larry Summers all told investors that they should prepare for the Federal Reserve to raise interest rates, not interest rate cuts reflected in market prices.
