China urges more FX hedging to aid exports

China's foreign exchange regulator has instructed banks to encourage more corporate clients to hedge currency risks, people with knowledge of the matter said, stepping up efforts to shield exporters from the yuan's steady appreciation.

The informal instructions, known as window guidance, were issued in recent months, the people said, underscoring the authorities' concerns about foreign exchange losses among exporters, one of the few bright spots in an otherwise sluggish economy.

Chinai's yuan inched higher to a fresh multi-year peak against the US dollar on Monday after the country's central bank set a stronger daily guidance, while investors awaited policy decisions from the Federal Reserve and the Bank of Japan. The yuan strengthened to a high of 6.7039 per dollar in early trade, its strongest level since February 2, 2023, before easing to 6.7074. The offshore yuan traded at 6.7074 yuan per dollar, up about 0.03% in Asian trading.


The regulator's move also suggests policymakers want companies prepared for further gains, or greater volatility, in the yuan , which has risen 4.3% this year.

Bloomberg News first reported the extension of the hedging drive. Financial regulators did not immediately respond to a Reuters request for comment.