Major state-owned banks in China were active in the onshore foreign exchange market on Friday, buying dollars to moderate the yuan’s appreciation, according to four sources familiar with the matter.
The yuan had risen to an eight-month high of 7.0895 per dollar, surpassing the 7.1 resistance level and reversing earlier losses for the year. These sources, who requested anonymity due to the sensitive nature of the information, indicated that the banks’ interventions are part of efforts to stabilize the currency.
Typically, state banks conduct such operations on behalf of the central bank, although they may also trade independently. Last week, Reuters reported that Chinese authorities have been subtly managing the currency to prevent sharp spikes that could disrupt domestic financial markets and impact exporters negatively.
Attention is also on whether the yuan’s recent gains might encourage exporters to convert an estimated $500 billion in foreign receipts into yuan. As of 0625 GMT, the yuan was trading at 7.0936 per dollar.
