Bluff or not, traders start accumulating the CNH devaluation

Option traders began to accumulate China's intentions for devaluation of Chinese Yuan - CNH. The one-month Call for USD/CNH call option jumped to 0.5% of the deal's value, interrupting the downward trend beginning in early February.

And we currently have no official response from the Chinese National Bank, but judging by market behavior, the likelihood of the Asian country taking such measures remains high.

Briefly on Devaluation - Devaluation is a decrease in the value of a given national currency relative to the value of goods, services or foreign currency against which it can be exchanged. Devaluation leads to higher prices for imported goods and lower prices for export goods. In this situation, gradually the purchases in the country are directed from the import goods to the national ones. There is an opportunity to reduce export costs, and this greatly supports local companies. This continues until the prices of the export goods have risen in comparison with the prices of the imported goods and a corresponding exchange equilibrium is established.

Source: Bloomberg Pro Terminal

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