Offshore Yuan Bets Losing $3.5 Billion, Morgan Stanley Estimates

March 20 (Bloomberg) -- More than $3.5b has been wiped off the value of offshore yuan structured products, Morgan Stanley estimates, as China’s slowing economy and mounting credit concerns weaken the currency.

* Losses on Target Redemption Forwards were probably in region

of $3.5b at an offshore exchange rate of 6.2 per dollar, a

level breached today in Hong Kong for the first time in

almost a year, the U.S. bank said in a research note today;

a slide to 6.38 is probable, a level that would lead to

losses of $7.5b, according to the note * “It’s inevitable the currency keeps weakening, and the

higher-volatility environment implies that the pace will be

quicker,” Geoffrey Kendrick, head of Asian currency and

rates strategy at Morgan Stanley in Hong Kong, said in a

phone interview today; “data has been weak, and we have

some credit concerns coming up” * Offshore yuan dropped 0.34% to 6.2073 as of 1:29 p.m. in

Hong Kong, according to data compiled by Bloomberg; that

extended its decline this month to 1.4%

For Related News and Information: Hedging $150 Billion Yuan Bets in Focus on Swings: China Credit NSN N2KB9Z6JIJUQ <GO> HSBC Sees Yuan Becoming Fully Convertible in Next 2 to 3 Years NSN N2O0S96S972H <GO>

To contact the reporter on this story: Justina Lee in Taipei at +886-2-7719-1579 or To contact the editors responsible for this story: James Regan at +852-2977-6620 or Andrew Janes

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