David Einhorn's Greenlight Capital May Gain From Yuan Move

Aug 12 2015 | 4:23pm ET

A unit of hedge fund magnate David Einhorn’s Greenlight Capital may be sitting pretty after China’s decision to devalue the yuan.

Greenlight Capital Re, a reinsurance operation controlled by Einhorn, disclosed in regulatory filings at the end of June that it had exposure to decline in the Chinese currency. Specifically, Greenlight Capital Re stood to gain $30.4 million if the dollar rose 10% against the yuan, according to an article by Bloomberg quoting an unnamed source.

Einhorn was reportedly further short the Chinese currencies via his hedge funds, although the exact size of the exposure has not been revealed. 

Trading the yuan has been notoriously difficult and expensive for all but the largest financial institutions, due largely to the currency’s managed float (i.e. manipulated exchange rates).

Greenhorn has long held a dim view of the Chinese currency, saying in mid-February that his macro outlook included a bet against the yuan.

China’s devaluation, aimed at boosting exports and domestic manufacturing, took capital markets by surprise earlier this week and pushed the yuan to a four-year low against the dollar. Unlike devaluations enacted by countries whose currencies freely float, however, China’s exchange rate is determined each day by the central bank. 

Despite statements suggesting the action Tuesday was a “one-off” readjustment, authorities let the yuan slip again on Wednesday, resulting in spot rates as low as 6.5410 per dollar, according to Reuters – a nearly 4% decline over the two days – and resulting in rumors that Chinese authorities have pegged the total size of the devaluation at up to 10%. 


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