BEIJING (Reuters) – Three persons with firsthand knowledge of the situation claimed China’s top state-owned banks were spotted selling US dollars to purchase yuan in both onshore and offshore spot markets in early Asian trading, movements geared at strengthening the Chinese currency.
State banks in China often deal in the country’s foreign currency market on behalf of the central bank, although they may also trade on their own behalf.
The dollar sales came as China’s top leaders committed on Monday to provide policy support for the economy amid a difficult post-COVID-19 recovery, concentrating on boosting domestic demand and signaling more stimulus measures.
Policymakers also stated that China will maintain the yuan exchange rate at normal and balanced levels, and that they will energise the capital market and restore investor confidence.
“It is interesting that the Politburo mentioned FX stability in the statement, for the first time in recent years,” HSBC analysts said in a note.
“This means that easing yuan depreciation pressures may become a higher policy priority going forward.” This is consistent with the People’s Bank of China’s (PBOC) recent tightening of FX policy.”
China’s monetary officials have recently increased their attempts to safeguard a falling yuan. Last week, policymakers lifted regulations to allow enterprises to borrow more money from abroad, while the PBOC has consistently provided stronger daily midpoint guiding rates.
The onshore yuan gained 0.6% to a high of 7.1411 per dollar and was trading at 7.1541 as of 0314 GMT. It is still down 3.5% versus the US dollar this year, making it one of Asia’s worst performers.
Its offshore equivalent maintained the upward trend and reached a week high of 7.1475 before closing at 7.1542.