Heavy selling in deliverable (onshore) forwards was again prevalent in Asia today. Players say customers feel that a change in Yuan policy is imminent and they have stepped up their hedging activity. Surprisingly though non-deliverable forwards (NDFs) were steady with short covering still noticeable around 6.60 in the 1-yr.
As stated yesterday a change to Yuan policy looks imminent but it is a very difficult trade to play. Proxy trades include KRW, TWD and MYR whilst AUD does have its fans. Otherwise one might consider selling into USD/HKD but this one has not budged for 20 years – that said it seems ridiculous that the Yuan should strengthen and not the HKD.