State-owned banks were actively selling U.S. dollars to acquire yuan in both onshore and offshore spot foreign exchange markets this week. Reports indicate that this effort was made to curb the depreciation of the Yuan.
The state-owned banks were also reported to have conducted trades for their own accounts and executed orders on behalf of their executive clients.
According to a trader based in Shanghai, the practice of state banks selling dollars has become a common strategy aimed at slowing down the pace of Yuan depreciation. This approach has also frequently been employed at the behest of the central bank when the Yuan faces pressure.
Meanwhile, during the trading hours of London and New York this week, the offshore branches were observed engaging in the sale of dollars.
However, the more significant decline in the value of the Yuan is attributed to China’s widening differential with the U.S. Investors are already expressing concerns about China’s weakened economic growth and increasing defaults.
Notably, the Yuan has recently depreciated by around 2.4% against the dollar within this month alone, marking a 6% decrease since the beginning of the year. In onshore trading, the Yuan was valued at 7.3145 per dollar, while the offshore rate reached 7.3400.
