China state banks buying dollars amid rapid yuan gains, sources say By Reuters

SHANGHAI/BEIJING (Reuters) – Major state-owned banks were buying dollars in China’s onshore foreign exchange market on Friday to slow down a rising yuan, four people with knowledge of the matter said.

The banks’ actions come as the yuan strengthened to an eight-month high of 7.0895 per dollar, breaking chart resistance at 7.1 and erasing year-to-date losses. The people requested anonymity because they are not authorised to talk about market matters publicly.

China’s state banks usually act on behalf of the central bank in the country’s foreign exchange market, but they could also trade on their own behalf.

Reuters reported last week that Chinese authorities have worked behind the scenes to ensure the currency does not spike abruptly, which could roil fragile domestic financial markets and hurt exporters.

Markets are also keenly focused on whether sharp gains for the currency could prompt exporters to start converting an estimated $500 billion in accumulated receipts into yuan.

The yuan traded at 7.0936 per dollar as of 0625 GMT.