Chinese state-owned banks sell dollars to halt yuan depreciation: Report

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foreign exchange markets, according to sources with direct knowledge of the situation, reported Reuters. State banks frequently follow instructions from the central bank when the yuan is under pressure, as it is now, even if they can also trade on their own behalf or to carry out customer orders. "State bank dollar selling has become a new normal to slow the pace of yuan depreciation," said one Shanghai-based trader to Reuters.

This week, during London and New York trading hours, state bank offshore branches were also observed selling dollars, according to two persons with firsthand knowledge of the situation who spoke to Reuters on Thursday. Such transactions in dollars could restrict offshore yuan declines and stop it from deviating too much from its onshore counterpart. Since this month, the yuan has fallen by around 2.4% and by 6% since the year's beginning.

As of 04:42 GMT, the onshore yuan was trading at 7.3145 per dollar, while the offshore yuan last sold for 7.3400. Due to China's expanding yield difference with the US, investors' fears about China's sluggish economic development and rising default risks in its real estate and shadow banking sectors have grown recently, which has caused the yuan's depreciation to become more pronounced. Investors have been dissatisfied with the government's delay in implementing stimulus plans to boost GDP.