If holders of these products rush to unwind their positions, it would push the yuan down further. Banks also need to hedge their positions via the derivatives markets, and given the asymmetrical nature of the products that could also result in downward pressure on the yuan.
Market players say that if the offshore yuan falls to 6.20 yuan per dollar, it will trigger major requirements for holders to make payments to their counterparties.
Morgan Stanley said it expects holders to face potential losses of up to $200 million per month if the yuan holds below 6.20 yuan per dollar. With average maturities of the structured products around 24 months, total losses could run into billions of dollars.
However, the yuan would have to remain consistently below 6.2 per dollar for such heavy losses to accumulate.
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While one-year offshore forwards, or non-deliverable forwards, are suggesting the yuan will reach 6.22 per dollar in a year, ANZ predicts the currency will be valued at 6.08 per dollar at the end of this year.
Derivative markets though are also signalling more yuan weakness.
Implied volatility on one-month dollar/yuan options, a gauge of perceived price swings, headed back towards a record on Wednesday and double the levels seen in all of 2013. Forward options points indicated more selling pressure.
The greater the volatility the more that banks will have to hedge their positions by buying dollars in the cash and derivative markets.
"Watch the vol," said the head of a currency trading desk at a European bank in Hong Kong, who declined to be identified because he was not authorised to speak openly to the media.
With the central bank signalling its comfort with a weaker currency, the absence of dollar selling by companies has only accelerated the fall in the yuan.
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"They are sending a message that you don't speculate on the yuan," said the executive director of an Asian macro hedge fund in Hong Kong, who also declined to be identified in the absence of authorisation to speak openly to the media.