High-yield USD fixed deposits are no longer attractive! Listed companies are increasing their currency hedging efforts.

Securities Times Reporter Wei Shuguang

Over the past year, global exchange rates have experienced significant fluctuations, becoming an important foreign exchange risk for A-share listed companies.

Since the China-U.S. trade friction in April 2025, the RMB has appreciated approximately 7.4% against the US dollar (based on offshore RMB). Industry insiders say that over the past three years, companies have accumulated around $500 billion in foreign exchange reserves. To manage the risks brought by exchange rate volatility, domestic companies are increasing their use of foreign exchange derivatives for hedging.

Listed companies intensify currency hedging

On March 17, Wangsu Technology announced that it has increased its foreign exchange hedging limit to $200 million to strengthen global business exchange rate risk management. Wangsu stated that as its global operations expand, the scale of foreign currency settlements abroad continues to grow. To effectively avoid and prevent risks from foreign exchange market fluctuations and to reasonably control the impact of exchange rate risks on business performance, the company has decided to adjust and continue engaging in foreign exchange derivatives hedging transactions.

This is just one of the latest examples of listed companies actively participating in foreign exchange hedging. According to data from Eastmoney Choice, as of March 18, listed companies have issued a total of 460 announcements related to foreign exchange hedging this year, a significant increase of about 70% compared to 268 announcements in the same period in 2025.

Since the second half of 2025, the RMB has continued to appreciate against the US dollar, impacting the finances of export companies and increasing their foreign exchange losses. The offshore RMB exchange rate once broke through 6.83 in late February, reaching a new high since April 2023.

Against this backdrop, currency hedging has become even more important, with strategies shifting from solely forward contracts to a combination of forwards, options, and other instruments. According to the State Administration of Foreign Exchange, by the end of February this year, the total outstanding forward foreign exchange settlement and sales reached $1.07 trillion, a record high since data collection began in 2010. During the same period, the net open interest of outstanding options was nearly $14.1 billion, approaching a two-year high.

Industry analysts interpret these rapid increases as indicating that since the RMB began appreciating in the first half of last year, export companies have significantly increased their net foreign exchange sales and purchased forward and options contracts to lock in exchange rates in advance and hedge against future fluctuations.

USD/RMB options trading volume surges

On February 27, the People’s Bank of China announced that the foreign exchange risk reserve requirement ratio for forward foreign exchange sales was lowered from 20% to 0%. This was the first adjustment in nearly three and a half years since the ratio was raised to 20% in September 2022 to counter depreciation pressures, and it is the sixth adjustment since the instrument was introduced in 2015.

Following the announcement, the RMB spot exchange rate retreated from a high of 6.84 to around 6.9, narrowing the gap with the central parity rate. Subsequently, since the US- Iran conflict in March and the dollar’s appreciation, the RMB experienced a phase of passive depreciation. However, as of March 18, the RMB spot rate remained around 6.87.

“Since 2023, the accumulated foreign exchange reserves have been around $500 billion, with key exchange rate levels between 6.8 and 6.9. This range could be a critical decision point for exporters considering whether to settle or hold foreign exchange, as funds may engage in bilateral bets within this zone,” said Duan Chao, Chief Macro Analyst at Industrial Securities.

Duan believes that during the RMB depreciation over the past three years, China’s trade surplus increased but did not profit from the exchange rate difference, leading exporters to hoard foreign currency. Although China’s trade surplus has widened, the significant trend of unilateral depreciation over the past three years meant exporters, after earning foreign exchange, were less inclined to settle, which is a key reason why the RMB exchange rate has not been strongly supported by exports. Historically, RMB appreciation has not constrained China’s export volume; the core reason for the disconnect between reality and theory lies in China’s leading manufacturing competitiveness globally.

Under the RMB appreciation trend, in February, the settlement and purchase rates fell from their January highs, but the purchase and sale rates further declined to new lows, indicating that market participants still have strong settlement intentions, with cautious demand for foreign exchange. Companies’ accumulated foreign exchange funds tend to be settled in a concentrated manner when the exchange rate rises, forming a cycle of “appreciation—settlement—another appreciation.”

Foreign investment banks report that domestic clients are actively purchasing options structures to lock in current profits and maintain bullish exposure, targeting levels even below 6.50. According to data from DTCC, by the end of February, USD/RMB options trading volume surged significantly, making it the second-largest options product globally. Notably, put options betting on RMB appreciation exceeding $100 million in volume are twice as large as call options betting on its decline.

High-yield USD deposits lose appeal

Looking at the longer term, since the China-U.S. trade friction in April 2025, the RMB has embarked on an appreciation journey.

In early 2025, due to high US interest rates, USD wealth management products became very popular, with some investors buying foreign exchange without regard for exchange rate risks. A year ago, the one-year USD deposit rate was 4.5%. Upon maturity, if they converted back to RMB, they might not have earned interest and could even have lost part of their principal.

By 2026, the market generally expects the US dollar to remain weak, and USD deposit rates have continued to decline. Under the dual influence of RMB appreciation expectations and falling US interest rates, USD deposits, once considered attractive investments, are now seen as “hot potatoes.” Since March 2026, major Chinese banks have lowered USD deposit rates across the board to below 3%.

(Edited by: Wen Jing)