In January 2015, the Swiss Franc rose dramatically in value as the Swiss National Bank removed its exchange peg to the Euro. Many fund managers believe that the Chinese Yuan will be devalued in 2016. There is a difference of opinion on how.
Some macro hedge funds believe the Yuan will be devalued by 20 - 50% in the coming months. They include Corriente Partners and Omni Macro Fund and will be looking at investment flows after the Chinese New Year next week. If the outflows continue, then they are predicting a one-time devaluation of the Yuan. Other fund managers think that the Central Bank will manage a gradual devaluation. The former set of managers are buying out of the money options. The latter set of managers are selling these same options as a hedge. They are buying options based on a 10% depreciation of the currency.
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