China’s state banks seen swapping and selling dollars for yuan – sources

U.S. Dollar and Chinese Yuan banknotes are seen in this illustration taken January 30, 2023. REUTERS/Dado Ruvic/Illustration/File Photo Acquire Licensing Rights

SHANGHAI, Dec 5 (Reuters) – China’s major state-owned banks were seen swapping yuan for U.S. dollars in the onshore swap market and selling those dollars in the spot market to support the yuan on Tuesday, two sources with knowledge of the matter said.

The state bank actions come at a time the Chinese yuan strengthened 2.55% to the dollar in November for the best month this year. However, it is still down 3% year-to-date.

The sources said they believed the state bank moves were aimed at accelerating the yuan’s recovery and encouraging domestic exporters to settle their foreign exchange receipts into the local currency towards the year-end.

Chinese state banks often act on behalf of the country’s central bank in the foreign exchange market, but they would also trade on their own behalf.

Big banks were spotted doing a similar trade late last month, helping the yuan’s recovery against a broadly weaker U.S. dollar, Reuters reported.

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