Chinese state banks sold dollars Tuesday night to support the Yuan

© Stocksak. FILEPHOTO: A woman holds Chinese Yuan banknotes. This illustration was taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

SHANGHAI/BEIJING – Two sources with direct knowledge of the matter said that major Chinese state-owned banks sold dollars in both offshore and onshore markets on Tuesday to support the weakening Yuan.

This dollar selling comes at a time when the Chinese currency is under increasing downside pressure. The Chinese currency has hit its weakest level since December 2007, and the value against major trading partners currencies is at a five month low.

According to one source, the yuan was lifted after the state banks sold dollars in the early hours of U.S. trade. This action took place on both the offshore and onshore markets.

Another source also reported that such state bank dollars were being sold on the offshore market late in the Asian Day.

Sources claimed that it was unusual for China’s big banks’ domestic branches to be involved with onshore trades during London or New York hours. However, they have traditionally dealt in the and used its moves in directing the onshore counterpart.

In recent sessions, the offshore yuan has fallen to record lows. This is due to a stronger dollar and concerns about a slowing Chinese economy.

State banks bought yuan to help it climb from 7.3746 per $1, a record low, to 7.3034.

After falling to 7.31 on Wednesday, the onshore currency recovered almost all intraday losses. It opened at 7.2949 USD when trading resumed Wednesday. The last trade was at 7.2971 GMT.

China’s state banks trade in foreign exchange markets on behalf of the People’s Bank of China, but they can also trade on their behalf or execute orders on behalf of corporate clients.

Chinese regulators have been hard at work implementing measures to stop the rapid depreciation of the yuan. They set a parameter for cross-border corporate finance to make it easier to raise funds from overseas markets for domestic companies.

Stocksak heard from sources that the FX regulator asked them about their position in currency markets.

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