TRF Holders Are Facing Huge Losses. The Relevant Contracts Will Aggravate The Renminbi's Downward Trend.

< p > US dollar / RMB inquiry system fell to 6.2218 at noon, the lowest in the intraday market to 6.2280, the expansion policy was only 4 days, the RMB exchange rate has already dropped by 778 points, and the decline in the year expanded to 2.7%. < /p >
The RMB exchange rate has dropped to nearly 1 years low. For some offshore derivatives investors, the exchange rate is at a key level that may cause huge losses, and the relevant stop loss may push the renminbi further down. < /p >
< p > a derivative called target-redemption forwards (TRF) can bring steady income to holders if the RMB does not depreciate significantly. Deutsche Bank and Morgan Stanley (Morgan Stanley) expect to sell $350 billion of such forward contracts since last year. < /p >
< p > the contract originally aimed at "a href=" //www.sjfzxm.com/news/index_c.asp "hedging exchange rate < /a > risks has evolved into a speculative product. If the RMB exchange rate with the US dollar can remain above a certain price, it will bring certain income to the holder. < /p >
< p > a href= "//www.sjfzxm.com/news/index_c.asp" > RMB to us dollar < /a > has been increasing every year since 2010, which makes buying related contracts a fixed investment strategy for some investors. Before the start of this year's fall, the yuan rose to 2.9% against the US dollar in 2013. Traders said that the fear of China's first domestic debt default and the worries about slowing China's economic growth also depressed market sentiment. < /p >
< p > RMB to us dollar < a href= "//www.sjfzxm.com/news/index_c.asp" > price < /a > has fallen over 6.15-6.20, and in this interval a large number of products will trigger the exercise rights, and the holders will face losses. < /p >
Geoffrey Kendrick, head of Asian foreign exchange and interest rate strategy at Morgan Stanley in Hongkong, said: "with the exposure of the structural products exposed by derivatives in the derivatives market, this may exacerbate the selling pressure of the renminbi, so offshore renminbi may continue to fall" P Morgan. < /p >
Less than 6.2250 weeks, the latest US dollar / Renminbi variety was released at 6.2300/90 on Wednesday, and the end of Wednesday was at the end of P. The latest offshore dollar / RMB spot in Hongkong is at 6.2032/62 yuan, and the last trading day was 6.1870 yuan. < /p >
Below P, each drop of 1 points will bring losses to the holder. According to five market sources, losses have risen to $3 billion in the past week or so. < /p >
< p > Geoff Kendrick said that the loss of these TRF could reach US $2 billion 300 million this year, but it is very difficult to figure out who owns these positions, because there are few enterprises to disclose their hedging strategies. < /p >
< p > analysts say that if the holders of these products slash their positions, the renminbi will be further suppressed. On Wednesday, the accelerated collapse of the renminbi against the US dollar after falling below the 6.20 key level may be related to these TRF. < /p >
P > banks also need to hedge their positions through the derivatives market, and in view of the asymmetry of these products, this may also bring downward pressure on the RMB. Market participants pointed out that if the offshore renminbi falls to 6.2, then there will be a large demand for the holder in order to compensate the counterparty. < /p >
< p > Morgan Stanley said that if the yuan stays below 6.20 yuan against the US dollar, it is expected that holders will lose up to 200 million dollars a month. The average duration of structured products is about 24 months, with a total loss of one billion US dollars. But the renminbi must remain below 6.20 for such a big loss. < /p >