Multinationals are scrambling to take out protection against wild swings in emerging market currencies – particularly the Chinese renminbi, which has become cheaper to hedge due to favourable interest rate differentials.
“In both G10 and emerging markets, we are seeing corporates increase their hedge ratios, hedge currencies previously left unhedged, and in some cases increase tenors on their hedges to manage this prolonged period of volatility,” says Desiree Pires, head of corporate sales in Europe at Standard Chartered.
Societe Generale is also having more conversations with corporates about hedging emerging market currency risks, says Antoine Jacquemin, the bank’s global head of market risk advisory and deputy head of western Europe corporate foreign exchange and interest rate sales.
The level of activity varies across countries, he says, often depending on interest rate differentials – also known as forward points. Demand…
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