Analysis: Chinese companies hang onto dollars, hedge to prepare for volatile yuan

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Some Chinese companies are holding on to dollar revenues from exports, while others are turning to foreign exchange hedging in anticipation of a fall in the value of the yuan, according to executives, bankers and data analysed by Reuters.

"I may need to convert some dollars into yuan to make payments to domestic suppliers," said Zhu, who prefers to go by her last name. " it feels like I should keep some dollars on hand, as the yuan will depreciate further."China's largest carrier by fleet size said in a Feb. 28 stock exchange filing that it planned up to $4 billion worth of currency hedging in 2023 to "smooth out exchange gains and losses", up from $850 million last year.

"Overall, yuan exchange rate will remain basically stable at reasonable levels," he added at a March 3. news briefing.The yuan had its worst year in 2022 since China unified market and official exchange rates in 1994, dropping nearly 8% as rising U.S. interest rates diverged from falling Chinese ones, supporting dollar gains.

"Still, the yuan could stabilise somewhat if the upcoming economic data shows continued improvement in the economy."for economic growth this year of around 5% as it kicked off its annual parliamentary gathering. With the economy staging a steady recovery, this could put a floor under the yuan and ultimately attract inflows.

 

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That's how smart the Chinese are. They can manipulate the currency to balance their books. Our RBA needs to weaken our dollar too

Companies have diversified portfolios, shocker.

Yuanto make money? Ride the dollar.

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