Recent Yuan Slide Cost Speculators $5.5 Billion

China is succeeding in making its currency less predictable. Investors are paying the price.

Clients of U.S. commercial banks have lost about $2 billion this year on $332 billion of options betting the yuan would appreciate, while Chinese companies lost $3.5 billion on $150 billion wagered on a benchmark forwards contract, according to data compiled by Morgan Stanley and the Depository Trust & Clearing Corp. in Washington. These contracts, when including bearish bets, account for more than a third of global trading in the Chinese currency.

After almost a decade of gains, speculators had come to regard the yuan as a one-way trade, leading to a surge in capital inflows that stands to leave the country vulnerable to a sudden shift in investor sentiment. Policy makers responded by selling the yuan and widening its trading band, encouraging a record 2.6 percent quarterly decline that was the biggest among Asian currencies.


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu