The Appeal of High-Yield USD Fixed Deposits is Fading as Listed Companies Intensify Hedging Efforts

Securities Times Reporter Wei Shuguang

Over the past year, significant fluctuations in global exchange rates have become an important foreign exchange risk faced by A-share listed companies.

Since the China-U.S. trade friction in April 2025, the RMB has appreciated approximately 7.4% against the US dollar (calculated based on offshore RMB). Industry insiders say that over the past three years, companies have accumulated around $500 billion in foreign exchange reserves. To manage the risks brought by exchange rate fluctuations, domestic companies are increasing their use of foreign exchange derivatives for hedging.

Listed companies are increasing their foreign exchange hedging

On March 17, Wangsu Technology announced that it has adjusted its foreign exchange hedging limit to $200 million to strengthen global business exchange rate risk management. Wangsu stated that as its global operations expand, the scale of foreign currency settlements abroad continues to grow. To effectively avoid and prevent risks from foreign exchange market volatility and to reasonably control the impact of exchange rate fluctuations on business performance, the company has decided to adjust and continue its foreign exchange derivatives hedging transactions.

This is just one of the latest examples of listed companies actively participating in foreign exchange hedging. According to data from Eastmoney Choice, as of March 18, this year, listed companies have issued a total of 460 announcements related to foreign exchange hedging, a significant increase of about 70% compared to 268 announcements in the same period in 2025.

Since the second half of 2025, the RMB has continued to appreciate against the US dollar, impacting the finances of export companies and increasing their foreign exchange losses. The offshore RMB exchange rate once broke through 6.83 in late February, reaching a new high since April 2023.

Against this backdrop, foreign exchange hedging has become even more important, with strategies shifting from single forward contracts to a combination of forwards, options, and other instruments. According to data from the State Administration of Foreign Exchange, by the end of February this year, the total outstanding forward foreign exchange settlement and sales reached $1.07 trillion, the highest since 2010. During the same period, the net open interest of options was nearly $14.1 billion, approaching a two-year high.

Industry analysts interpret these rapid increases as indicating that since the RMB exchange rate entered an appreciation channel in the first half of last year, export companies have been heavily increasing their net foreign exchange sales and buying forward and options contracts to lock in exchange rates in advance and hedge against future fluctuations.

USD/RMB Options

Trading volume surges

On February 27, the People’s Bank of China announced that it would reduce the foreign exchange risk reserve requirement ratio for forward foreign exchange sales from 20% to 0%. This was the first adjustment in nearly three and a half years since September 2022, when the ratio was increased to 20% to cope with depreciation pressures. It is also the sixth adjustment since the instrument was created in 2015.

After the announcement, the onshore RMB spot exchange rate fell from a high of 6.84 to around 6.9, narrowing the gap with the central parity rate. Subsequently, since the US-India-Iran conflict in March and the impact of dollar appreciation, the RMB experienced a phase of passive depreciation. However, as of March 18, the RMB spot rate remained around 6.87.

“Since 2023, the accumulated foreign exchange reserves have been around $500 billion, with key exchange rate levels between 6.8 and 6.9. This range could be a critical decision point for exporters on whether to convert their foreign exchange holdings, with funds potentially engaging in bilateral bets within this zone,” said Duan Chao, Chief Macro Analyst at Industrial Securities.

Duan Chao believes that during the RMB depreciation over the past three years, China’s trade surplus increased but did not profit from the exchange rate difference, leading exporters to hoard foreign exchange. Although China’s trade surplus has widened, the significant unilateral depreciation trend over the past three years has resulted in exporters earning foreign currency but being less willing to convert it, which is a key reason why the RMB exchange rate has not been strongly supported by exports. Historically, RMB appreciation has not constrained China’s export volume; the core reason for the disconnect between reality and theory lies in China’s leading manufacturing competitiveness globally.

Under the RMB appreciation trend, in February, the settlement and conversion rate fell from the high point in January, but the purchase and sale rate further declined to a new low, indicating that market participants still have strong willingness to settle and convert, with cautious demand for foreign exchange purchases. Companies’ accumulated foreign exchange holdings are being converted during exchange rate rebounds, forming a cycle of “appreciation—conversion—another appreciation.”

Foreign investment banks’ reports indicate that domestic clients are actively purchasing options structures to lock in current profits and maintain bullish exposure, targeting levels as low as 6.50 or even lower. According to data from DTCC (Depository Trust & Clearing Corporation), by the end of February, USD/RMB options trading volume surged significantly, making it the second-largest options market globally. Among these, put options betting on RMB appreciation exceeded $100 million, twice the volume of call options betting on its decline.

High-yield USD deposits are no longer attractive

Looking at the longer term, since the China-U.S. trade friction in April 2025, the RMB has embarked on an appreciation journey.

In early 2025, due to higher US interest rates, USD wealth management products were very popular, with some investors buying foreign exchange without regard for exchange rate risks. A year ago, the one-year USD deposit rate was 4.5%. Upon maturity, if converted back to RMB, investors might not have earned interest and could have even lost part of their principal.

By 2026, the market generally expects the US dollar to remain weak, and USD deposit rates have continued to decline. Under the dual influence of RMB appreciation expectations and falling US interest rates, USD deposits—once considered a lucrative investment—are now seen as “hot potatoes.” Since March 2026, major Chinese banks have lowered USD deposit rates to below 3%.

(Edited by: Wang Zhiqiang HF013)

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