Daily Management Review

Chinese banks step up sales of dollars to support the yuan


To support the yuan, Chinese state banks increased their currency interventions. The local market's sale of dollars is intended to stabilize the exchange rate, which has already decreased by 12% against the dollar since the year's beginning.

faungg's photos
faungg's photos
Major state banks in China use currency swaps to convert yuan into dollars, which are then sold on the local market.

Traders think that such a policy can only have a temporary impact. According to a trader at a Western investment bank's Shanghai branch, "Such currency interventions typically don't deliver benefits in the long term, but they will have an immediate short-term influence."

Another trader did not completely rule out the possibility that the XX Congress of the Communist Party of China, which started in Beijing, was the reason for the activation of currency interventions to strengthen the yuan.

At the end of September, word spread that the Chinese government wanted to support the weakening currency. The People's Bank of China then reportedly instructed the nation's state banks to get ready to sell dollars and purchase yuan, according to multiple sources cited by Reuters.

source: reuters.com