Hedge funds are piling into bullish options bets on the Chinese yuan, positioning for dollar weakness after softer-than-expected US payrolls raised concerns about the strength of the American economy, according to a report by Bloomberg.
The cost of three-month options wagers favouring yuan appreciation over depreciation is hovering near its highest level since August 2024, a clear signal that fast-money funds are increasing exposure to a weaker greenback.
The report cites Ruchir Sharma, global co-head of FX options at Société Générale in London, as noting that strikes below 7.00 are drawing strong interest with the onshore yuan ending last week at 7.1324 per dollar.
The trade is supported by the People’s Bank of China, which last month signalled tolerance for a stronger currency. On Monday, the central bank set the daily fix at its firmest since November. At the same time, a sharp rebound in Chinese equities has tempered expectations of further monetary easing, adding to the case for yuan gains.
Data from the Depository Trust & Clearing Corporation show that Friday’s two largest offshore yuan-dollar trades were put options struck at 6.90, which pay off if the pair drops below that level.
