Yuan Derivatives Blowup Curses Taiwan Businesses With Defaults
- Currency's 8% drop spells losses on Target Redemption Forwards
- `It's even worse than a casino,' says businessman of bank
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On Aug. 7, Kevin Kuo was having his fortune told at a Kyoto shrine in the Japanese tradition of picking out bamboo sticks. He got two that read "curse."
For the 39-year-old home appliance importer, calamity came in the form of a shock yuan devaluation four days later. Kuo’s Taipei-based firm was holding two Target Redemption Forward contracts, a structured product used to bet on yuan appreciation. By the time both matured in early January, he had lost a net NT$11.6 million ($347,200).