The PBOC has asked large Chinese banks to suspend closing of foreign exchange positions and maintain open positions for some time in order to ease the pressure of the yuan’s depreciation, reported Reuters .
The PBOC had given informal window guidance to banks, asking them to suspend closing out their positions in the interbank foreign exchange market after selling US dollar to their clients until their spot FX positions reach a certain level, the report said.
This means that after companies made large purchases of dollar, some of the funds will be absorbed by the banks and remain there for a certain period of time to ease the pressure of the yuan’s depreciation.
Some banks were told that if companies purchased $50 million or more in foreign exchange, they would need to seek approval from the central bank, the report said.