China’s major state-owned banks were seen busy selling U.S. dollars to buy yuan in both onshore and offshore spot foreign exchange markets this week, people with direct knowledge of the matter said, in an attempt to slow the yuan’s depreciation.
Though they also trade on their own behalf or to execute clients’ orders, state banks often act at the behest of the central bank when the yuan is under pressure, as it is now.
“State bank dollar selling has become a new normal to slow the pace of yuan depreciation,” said one Shanghai-based trader.
Offshore branches of the state banks were also seen selling dollars during London and New York trading hours this week, two sources with direct knowledge of the matter said on Thursday.
Such dollar selling could limit falls in the offshore yuan and prevent it from diverging too far from its onshore counterpart.
The yuan has lost about 2.4% against the dollar since this month, and 6% since the start of the ye ..