High-yield USD fixed deposits are no longer attractive! Listed companies are increasing their currency hedging efforts.

Securities Times reporter Wei Shuguang

Over the past year, global exchange rates have fluctuated sharply, becoming an important foreign-exchange translation risk facing A-share listed companies.

Since the U.S.-China trade frictions in April 2025, the RMB has cumulatively appreciated by about 7.4% against the U.S. dollar (calculated using the offshore RMB measure). Industry insiders say that over the past three years, the amount of funds held in foreign exchange by enterprises is expected to be around $500 billion. To manage the risks brought by exchange-rate volatility, domestic companies are stepping up their hedging efforts using foreign-exchange derivatives.

Listed companies step up FX hedging

On March 17, Wangsu Technology announced that it would adjust its foreign-currency hedging quota to $200 million, strengthening its global business’s exchange-rate risk management. Wangsu Technology said that as its global business continues to expand, the scale of foreign-currency settlements in its overseas business keeps growing. To effectively avoid and mitigate the risk of volatility in the FX market, and to reasonably control the impact of exchange-rate risk on its operating performance, the company decided to adjust and continue to carry out foreign-exchange derivative hedging transactions.

This is just one of the latest examples of listed companies actively participating in foreign-exchange hedging. Securities Times reporter searched the Eastmoney Choice data and found that as of March 18, since the beginning of this year, listed companies had released a total of 460 announcements related to corporate foreign-exchange hedging. Compared with 268 such announcements in the same period in 2025, it surged by about 70%.

Since the second half of 2025, the RMB has continued to appreciate against the U.S. dollar, putting pressure on exporters’ finances and causing enterprise FX translation losses to expand. The offshore RMB exchange rate once briefly broke above the 6.83 level in late February, reaching a new high since April 2023.

Against this backdrop, FX hedging is becoming increasingly important, and strategies have shifted from a single forward contract to the coordinated use of forwards, options, and combination instruments. According to data from the State Administration of Foreign Exchange, as of the end of February this year, the cumulative outstanding amount of forward foreign-currency settlement and sales reached $107 billion, the highest historical record since data began in 2010. In the same period, the net open position of outstanding FX options was also close to $14.1 billion, nearly a new high in two years.

In this regard, industry insiders analyze that the rapid rise of these two indicators shows that after the RMB exchange rate entered an appreciation channel in the first half of last year, export enterprises have substantially increased their net buildup of foreign exchange—taking on forward and options contracts to buy the RMB and sell foreign exchange—thereby locking exchange rates in advance to hedge the risk of subsequent exchange-rate fluctuations.

U.S. dollar-to-RMB option

Trading volume surges

On February 27, the central bank issued an announcement to cut the foreign-exchange risk reserve ratio for forward foreign-exchange sale business from 20% to 0. This was the first adjustment in nearly three and a half years, since it had been raised to 20% in September 2022 to address depreciation pressure. It was also the 6th time this tool has been adjusted since it was created in 2015.

After the announcement, the RMB spot exchange rate moved back from the peak of 6.84 to around 6.9, narrowing the gap with the midpoint rate. Subsequently, starting in March, the impact of the conflict between the U.S. and Iran led by the U.S. dollar’s appreciation pressured the RMB into a phase of passive depreciation. However, by March 18, the RMB spot exchange rate still stayed around 6.87.

“Since 2023, the scale of FX hoarding is expected to be around $500 billion, and the more concentrated exchange-rate levels for hoarding are 6.8–6.9. This point may be the key level determining exporters’ decisions on whether to convert foreign exchange into RMB. Funds may engage in bilateral games within this range.” said Duan Chao, chief macro analyst at Industrial Securities.

Duan Chao believes that during the past three years of RMB depreciation, although China has earned trade surpluses, it did not earn an FX spread, leading exporters to hoard foreign exchange. Although China’s trade surplus has gradually widened, due to the significant one-way depreciation trend over the past three years, after exporters earn foreign exchange, their willingness to convert it into RMB has been relatively low. This is also an important reason why the RMB exchange rate has not received strong support from exports over the past three years. Judging from historical trends, RMB appreciation has not constrained the volume of China’s exports. The core reason for the divergence between reality and theory lies in China’s globally leading manufacturing industry competitive advantage.

Under the background of RMB appreciation, in February, the collection and conversion rate for foreign exchange fell back from January’s high, but the payment and purchase rate continued to drop further to a new low, showing that market participants’ willingness to convert foreign exchange into RMB remains strong, while demand for buying foreign exchange is relatively cautious. The foreign-exchange funds that firms had accumulated earlier for conversion tend to be converted in a concentrated way when the exchange rate rises, forming a “appreciation—conversion—further appreciation” cycle.

A report from foreign-invested investment banks noted that domestic clients are actively purchasing option-structured products to lock in current profits and maintain bullish exposure, with targets directly aiming at the 6.50 level or even lower. Based on data from the Depository Trust & Clearing Corporation (DTCC), at the end of February, the trading volume of U.S. dollar-to-RMB options surged significantly, becoming the second-largest options product by global trading volume. Among them, the trading volume of put options betting on RMB appreciation reached $100 million or more—twice the trading volume of call options betting on its decline.

U.S. dollar high-yield time deposits aren’t as attractive anymore

Looking at a longer time horizon, since the U.S.-China trade frictions in April 2025, the RMB has embarked on its appreciation journey.

In early 2025, because U.S. dollar interest rates were high, dollar wealth-management products were very popular in the market. Some investors bought foreign exchange, entering the market, without paying attention to exchange-rate risk. A year ago, the one-year U.S. dollar time-deposit interest rate was 4.5%. If investors converted at maturity, they would not only fail to earn interest—they might even lose part of the principal.

Entering 2026, the market generally expects that U.S. dollar weakness is unlikely to change, and the interest rates on U.S. dollar deposits have continued to fall. Under the dual impact of expectations for RMB appreciation and declining U.S. dollar rates, U.S. dollar deposits—which were once viewed as the “hot pick” for investment—are now becoming a “hot potato.” Currently, starting in March 2026, major banks in mainland China have already reduced U.S. dollar deposit rates across the board to below 3%.

(Editor: Wen Jing)

Keywords:

                                                            U.S. dollar