Last week’s debut of FX option transactions in China will enable onshore companies to better hedge their longer-term currency exposures, according to Deutsche Bank’s Beng-Hong Lee, head of FX trading, China. Effective April 1, the new rules, issued by the State Administration of Foreign Exchange Safe, will allow trading of so-called European-style FX options between licensed local banks, institutions and corporations.
Options give the buyer the right, but not the obligation, to buy or sell currency at a specified exchange rate during a defined time period. European-style options can only be exercised at maturity.
“From a corporate perspective in China, this onshore FX option market is...
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