The First Day Of RMB Expansion Dropped Sharply, And Domestic Banks Rushed To Buy Dollars.

< p > March 17th, < a href= "http://www.91se91.com/news/index_c.asp" > RMB > /a > spot exchange rate dropped by 279 basis points (0.45%), and the fluctuation rate was about 0.5%. "Welcome" the first trading day of the RMB to us dollar exchange rate fluctuation range from 1% to 2%.

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Less than P, the market power that triggered a sharp fall has quietly changed from the earlier arbitrage capital to a bank dollar hedging buying.

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< p > a foreign exchange trader of a state-owned bank revealed that on the same day, domestic banks continued to buy dollars and directly lowered the exchange rate of the RMB against the US dollar. "They also have their emotions. The bank has to hold as many US dollar positions as possible to cope with the potential large devaluation of the renminbi in the superposition of the two-way fluctuation probability of RMB and the expansion of the volatility."

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< p > arbitrage funds begin to expand the RMB exchange rate volatility and find new arbitrage methods.

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P, a US investment bank, revealed that hedge funds found them on the same day and were planning to cooperate in issuing a new RMB exchange rate derivative similar to the "target redemption forward contract".

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< p > "target redemption forward contract", that is, a financial derivative bet on the unilateral appreciation of the RMB, the specific arbitrage mode is to set up a "strike price" which is slightly lower than the current RMB exchange rate and a "protective price" far below the current RMB exchange rate during the agreed term of the contract term. As long as the RMB exchange rate is higher than the execution price on the day of the annual settlement date, the investor can buy the RMB at the market price below the exchange rate and collect the exchange earnings.

If the RMB exchange rate is lower than the protective price, investors will be forced to pay 2 times the amount of investment in the name of the derivative, and the investment bank will make a settlement according to the execution price, and the corresponding amount of foreign exchange losses will increase exponentially.

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< p > over the past year, the value of such derivatives assets once exceeded $350 billion during the continued appreciation of the renminbi.

But at the end of February, a significant devaluation of the Renminbi made investors suffer heavy losses and few people asked for it.

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< p > in these hedge a href= "http://www.91se91.com/news/index_s.asp" > fund < /a >, the coldly "target redemption forward contract" needs minor modifications and creates new RMB arbitrage opportunities.

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< p > specifically, this derivative will draw on some provisions of the "target redemption forward contract", that is, the execution price below the current RMB exchange rate, but the investor should buy the RMB monthly profit at the execution price, which needs to meet the "days of unilateral fluctuation over 0.5% of the RMB exchange rate within a month, not more than 10 trading days"; conversely, the hedge fund will sell a certain amount of RMB to the investor according to the agreed price (above the base point of the day's RMB exchange rate), so that the latter will suffer exchange losses.

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"P >" in the final analysis, this is a derivative of the RMB exchange rate fluctuation to expand arbitrage.

The more days the RMB's unilateral volatility exceeds 0.5%, the greater the bet for hedge funds and investors.

He revealed.

These hedge funds dare to bet so much that they have measured the recent fluctuations in the RMB's daily range, and found that during the devaluation of the RMB in the end of February, there were more than 0.5% RMB days in a number of trading days.

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< p > March 17th, the implied volatility of the US dollar against the renminbi reached a two-year high in the 1 months, and the hedge fund's odds increased correspondingly.

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< p > they also believe that RMB yen arbitrage pactions will continue to ebb.

Because the two-way fluctuation of the RMB exchange rate widened and increased the exchange risk of the paction, the arbitrage capital scale has shrunk dramatically, which will eventually force the RMB exchange rate to fluctuate further.

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< p > "there is no recent redemption surge, mainly because the Central Bank of Japan intends to implement a new round of quantitative easing monetary policy, so that these arbitrage capital still optimistic about the RMB yen appreciation trend, choose to wait and see."

The foreign exchange trader said, but large-scale withdrawal is only a matter of time.

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Compared with hedge fund, the foreign trade enterprise is facing a higher risk of US dollar exchange than p hedge fund.

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"P", a foreign trade enterprise, has revealed that the RMB has been appreciating unilaterally and has a small fluctuation in the past. They usually first estimate the appreciation of the RMB for the next half of the year (or one year), and then sign a corresponding RMB exchange paction with the bank, which is now difficult to predict.

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< p > a bank recommended to him to buy RMB exchange rate options to achieve hedging.

But he hesitated.

Because he is worried that the liquidity of RMB options market is not high, the risk of delivery default increases correspondingly, and arbitrage hot money holds a large number of positions in offshore RMB options trading, which can "manipulate" the trend of RMB short-term exchange rate, and affect the success or failure of enterprises to participate in the hedging of RMB options pactions.

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< p > in the view of the above foreign exchange traders, to really curb the scale of arbitrage hot money, it is far from enough to expand the fluctuation range of RMB exchange rate and reduce the expected value of RMB unilateral appreciation. It is necessary to further improve the formation mechanism of RMB a href= "http://www.91se91.com/news/ index_cj.asp" > exchange rate < /a > intermediate price, and to "compress" the price difference between domestic and foreign RMB through the exchange rate marketization pricing, so that arbitrage hot money can not be profitable.

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