New | Rising dollar upsets Chinese companies
Weakening yuan forces firms to hedge or reduce their borrowings in greenback and changes the way they have been used to raising funds
The stronger US dollar is making Chinese entrepreneurs increasingly nervous.
The once steady appreciation of the yuan has made them used to earning in the Chinese currency and borrowing in the dollar, but the resurgent greenback is forcing treasurers to hedge or repay their dollar borrowings.
The unwinding of foreign exchange positions by corporate treasurers by selling the yuan and buying the dollar was taking place on a massive scale and would lead to further depreciation of the yuan, increase capital outflows and eventually change the traditional pattern of how Chinese firms raise funds, market players said.
The spot rates for both the onshore and offshore yuan were trading on Friday at their lowest levels since October 2012.
The 12-month non-deliverable forward for offshore yuan, which reflects market forecasts of the currency, was at 6.414 to the dollar, down 2 per cent from Thursday.
"This is just the beginning," said Charles Feng, the head of foreign exchange, rates and credit trading at Standard Chartered Bank, who had seen the drastic change since late last year.