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China is succeeding in making its currency less predictable.The losses in the options market were on outstanding yuan call options reported by U.S. banks, which clients took out to hedge or speculate on the Chinese currency.The yuan's decline also caught investors – 90 percent of them Chinese companies – in the so-called Target Redemption Forwards market. The median estimate of 40 strategists surveyed by Bloomberg has China's currency climbing to 6.09 by June 30 and to 6 by year-end.Goldman Sachs Group Inc. estimates that the currency is 6.5 percent overvalued on a trade-weighted basis.Implied three-month volatility in the Chinese currency rose to 2.62 percent on March 20, the highest closing level in two years and up from 1.78 percent at the end of 2013, according to data compiled by Bloomberg.The currency's decline also threatens to spark capital outflows at a time when some Chinese companies are already short on cash.
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