SHANGHAI (Reuters) – China’s big state-owned banks were seen aggressively mopping up offshore yuan liquidity on Monday, three people familiar with the matter said.
State-owned banks often act as agents for the central bank in the offshore foreign exchange market, but they can also trade on their own behalf and execute client orders.
A tightening of offshore yuan liquidity could also help stabilize the currency, one of the sources said.
The move effectively increased the short cost of the Chinese yuan as local sectors face increasing pressure to depreciate the yuan.
Sources familiar with the matter said the cost of shorting the yuan has jumped, as evidenced by the surge in the offshore yuan tomorrow futures points.
Following the state-owned bank’s move, the offshore renminbi narrowed some of its losses to 7.3050 yuan from its intraday low of 7.3360 yuan to the dollar at 0923 GMT, while the onshore renminbi also cut some of its previous losses. Abandoned and traded at 7.2996 yuan.
China’s largest state-owned banks last week sold US dollars to buy yuan in the onshore and offshore spot foreign exchange markets to prevent a rapid depreciation of the yuan, sources familiar with the matter told Reuters. It seems that he was busy.
(Reporting by Shanghai Newsroom, Editing by Ed Osmond and Angus Maxwan)
