China’s State-Owned Banks Sell Dollars to Buy Yuan, Easing Depreciation Pressure
SHANGHAI, July 20 (Reuters) – China’s major state-owned banks have reportedly been selling dollars in the offshore spot market in an effort to buy yuan, according to sources familiar with the matter. The move is aimed at slowing down the decline of the yuan currency, one of the sources revealed.
To further support the currency, China’s central bank announced on Thursday that it will relax a cross-border financing rule. This new measure will make it easier for domestic firms to raise funds from overseas markets, thus alleviating depreciation pressure on the yuan.
As a result of these actions, the offshore yuan has strengthened by over 0.7% against the dollar, reaching a high of 7.1812 per dollar before settling at 7.1890 as of 0249 GMT. However, in the onshore market, the yuan has also experienced a similar upward bounce but remains down by approximately 4% against the dollar year-to-date, making it one of the worst-performing Asian currencies for 2023.
The efforts by China’s state-owned banks and the central bank to counter the depreciation of the yuan come as the country faces increasing economic challenges, including trade tensions with the United States and slowing economic growth. By bolstering the value of the yuan, China aims to stabilize its currency and boost confidence in its economy.
Reporting by Shanghai Newsroom
Editing by Shri Navaratnam