China’s major state-owned banks were seen exchanging yuan for U.S. dollars in the onshore swap market and selling those dollars in spot currency markets this week, two sources told Reuters on Tuesday.
The yuan has gained 2% in the past week, to stand at levels of around 7.13 to the dollar – its highest in nearly 4 months – and the big state banks have continued to sell dollars for yuan this week, the sources said.
Both sources spoke on condition of anonymity as they were not authorised to speak to media about the matter.
State banks are often suspected of stepping into the currency market on behalf of the authorities, but the timing is unusual as they would usually sell dollars when the yuan was under pressure to depreciate.
Their action over the past week came amid broad dollar weakness. The dollar index , which measures the currency’s value against major trading partners, has retreated more than 3% in November, as U.S. yields succumb to signs of a peak in Federal Reserve monetary tightening.
Some market participants said state banks might be trying to speed the yuan’s gains and spur exporters to convert more of their FX receipts into yuan. The Chinese currency is still down more than 3% against the dollar this year.
The selling of dollars by state banks caused the onshore spot yuan to briefly touch 7.1296 per dollar, firmer than its daily official guidance for the first time in four months.