China’s state-owned banks sold dollar amid yuan’s sharp weakening

 

>>REAL-TIME UPDATES IN THE WIRE. CLICK HERE<<<

 

 

China’s state-owned banks were seen selling dollars in the offshore spot foreign exchange market on Tuesday, according to traders and people with knowledge of the matter.

The selling was seen as the offshore yuan approached the psychologically important 7.25 per dollar mark, they said.

State banks usually act on behalf of the country’s central bank in the foreign exchange market, though they could also trade for themselves or their clients.

Before the market open on Tuesday, the People’s Bank of China (PBOC) set a stronger-than-expected daily fixing for the yuan, in a sign the authorities are growing increasingly uncomfortable with its quickening slide.

The yuan has fallen about 4% on the dollar in two months as flagging consumer confidence and a soggy property market have sapped momentum from the post-pandemic recovery. The yuan ended Monday at a seven-month low of 7.2425 per dollar and was at 7.2105 in Tuesday afternoon trade.

Analysts said that together the moves showed official unease at the yuan’s downward momentum and that they could slow but perhaps not halt a decline, given the dour economic outlook.

UBS said in a note that its trading desk saw heavy interest among banks in pre-market trades to procure dollars via buy-sell currency swaps, and said there might have been efforts by the authorities to neutralise the impact from their spot intervention.

Analysts said moves to halt the yuan’s slide were not yet as firm as last year, when regulators rolled out measures to encourage capital inflows, but might be enough to slow selling.