Hedging Renminbi with EUR. What is the reason why FX traders sometimes go long EUR to hedge shorts in RMB?
This is not an answer but I cannot post the comment as it is too long with the link:
Never heard of this. Maybe best to ask the traders you chatted to and post your answer afterwards here. Simply looking at a chart makes me wonder how this should work.
If a European firm hedges their EURRMB exposure by selling/buying RMB to buy/sell EUR (forward), that is just a normal fx (forward) transaction but not hedging your RMB short position with EUR.