When a hedge is not a hedge

Citic Pacific's $2 billion loss was characterised as a currency hedge, but if that was really its intention it had quite the opposite effect.

Leslie Chang must have buried his head in his hands on more than a few occasions during the past few months. Before the summer, Citic Pacific's finance chief had been quietly profiting from the Aussie dollar's gentle rise against the US dollar, but his satisfaction turned to horror in July when the foreign exchange market turned suddenly and severely against him.

Thanks to a series of highly leveraged FX bets that he made, Chang, who resigned on Monday, committed Citic...

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