SHANGHAI/BEIJING (Reuters) – China’s largest state-owned bank was seen selling the US dollar and buying the yuan in both the onshore and offshore spot markets in early Asian trading on Tuesday, three people with direct knowledge of the matter said.
China’s state-owned banks usually trade in the foreign exchange market on behalf of the central bank, but they can also trade on their own behalf.
The dollar sold off on Monday after Chinese leaders pledged to step up policy support for the economy, focusing on boosting domestic demand and hinting at further stimulus amid a tortuous post-coronavirus recovery.
Policymakers also said China would keep the yuan exchange rate basically stable at a reasonable and balanced level, pledging to revitalize capital markets and restore investor confidence.
“It is interesting that the Politburo has mentioned exchange stability in a statement for the first time in recent years,” HSBC analysts said in a note.
“This means that easing pressure on the yuan to depreciate may become a more policy priority going forward, which is consistent with the recent further tightening of currency policy by the People’s Bank of China (PBOC).”
China’s financial authorities have stepped up efforts to protect the currency’s depreciation in recent days. Regulators last week eased rules allowing companies to borrow more abroad, while the central bank was more persistent in setting the daily midpoint target rate than market expectations.
The onshore yuan rose more than 0.6% to a high of 7.1411 yuan to the dollar, to 7.1541 as of 0314 GMT. It is still down 3.5% against the dollar so far this year, making it one of the worst performing Asian currencies.
The offshore market followed the trend, rising to a one-week high of 7.1475 before closing at 7.1542.
Reported by Shanghai and Beijing Newsroom.Editing: Christopher Cushing and Sri Navaratnam
Our criteria: Thomson Reuters Trust Principles.
