China’s State-Owned Banks Selling U.S. Dollars to Boost Yuan
SHANGHAI, Aug 17 (Reuters) – China’s major state-owned banks have been actively selling U.S. dollars and buying yuan in an effort to curb the rapid decline of the Chinese currency, according to sources familiar with the matter.
The state banks, which typically operate on behalf of China’s central bank in the foreign exchange market, have been seen trading both onshore and offshore. This includes selling dollars during London and New York trading hours, as well as offering dollars in onshore foreign exchange markets.
The purpose of this dollar selling is to prevent the offshore yuan from deviating too far from its onshore counterpart and to control the pace of yuan depreciation, one source explained.
The onshore yuan was trading at a rate of 7.3096 per dollar as of 0205 GMT, while the offshore yuan was last recorded at 7.3356.
The move by China’s state-owned banks highlights the government’s efforts to stabilize the yuan amidst growing economic uncertainties. The yuan has been under pressure recently due to the ongoing trade tensions between the United States and China.
By selling dollars and buying yuan, the state banks are seeking to support the value of the Chinese currency and prevent further depreciation. This strategy aims to instill confidence in the market and maintain stability in the Chinese economy.
It is important to note that while the state banks act on behalf of the central bank, they also have the flexibility to trade on their own behalf or execute orders from their clients.
The exact impact of the dollar selling on the yuan’s depreciation remains to be seen. However, this intervention by the state banks demonstrates the government’s commitment to maintaining stability in the foreign exchange market and protecting the value of the Chinese currency.
Reporting by Shanghai Newsroom; Editing by Jacqueline Wong
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