Hedge funds ease off profitable China FX options trade

Some still hold positions but an appreciating renminbi may make them less profitable for now

The weeks-long foreign exchange options trade profiting on a depreciating Chinese currency may be nearing its end, as Chinese central bank efforts and a recently weakening US dollar have made for a stronger renminbi.

Funds had piled into outright and exotic options structures that capitalised on a low-volatility environment and the renminbi’s gradual depreciation against currencies including the dollar. Some may still be holding on to their positions since a slow move downward in US dollar