Chinese firms sell record amount of currency options in first half of 2025

Broad US dollar weakness has underpinned the renminbi, but domestic economic weakness and lingering trade uncertainty with the US have limited its upside

Published Thu, Aug 7, 2025 · 03:40 PM

Chinese companies sold a record amount of currency options in the first half of this year as domestic businesses, particularly exporters, bet on a steady renminbi and used derivatives to make some extra money.

The trend is further evidence Chinese exporters are reluctant to convert their foreign exchange receipts back into low-yielding renminbi, despite broad US dollar weakness, but are seeking to hedge against potential currency risks.

Broad US dollar weakness has underpinned the renminbi, but domestic economic weakness and lingering trade uncertainty with the US have limited its upside.

Commercial banks sold a record US$132.5 billion worth of US dollar/renminbi options January to June on behalf of their clients, official data from the State Administration of Foreign Exchange (Safe) showed.

The renminbi strengthened 1.9 per cent against the greenback in that period even though the US dollar index dropped nearly 11 per cent as the central bank anchored the currency.

One-month US dollar/renminbi implied volatility is around 2.5 per cent, the lowest since July 2024.

The central bank’s tight grip over the renminbi, limiting gyrations in either direction, has prompted exporters to take advantage of the low volatility to trade options to enhance returns from their US dollar holdings, traders and analysts said.

Some banks recommended “selling call options” to their corporate clients, two banking sources with direct knowledge of the matter said.

By selling into one-year US dollar/renminbi call options with strike prices higher than the current spot level, corporate clients can benefit regardless of how the renminbi moves, one source said. If the spot rate moves higher within 12 months, the option will be exercised, giving the exporter a higher rate. If not, they will collect a premium on the option. REUTERS

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