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SHANGHAI –China‘s major state-owned banks were seen actively mopping up the offshore yuan on Monday, three people with knowledge of the matter said, as the currency comes under growing pressure from a darkening economic outlook and strain in the property sector.
State banks often act as agents for China‘s central bank in the offshore foreign exchange market, but they could also trade on their own behalf or execute their clients’ orders.
Tightening up offshore yuan liquidity could also act to stabilize the yuan, one of the sources said.
The move effectively raised the cost of shorting the Chinese yuan, at a time the local unit is facing mounting depreciation pressure.
Following the state bank move, the offshore yuan rallied and was last trading at around 7.2834 per dollar, up around 0.3 percent on the day. The onshore yuan was also firmer at around 7.28 per dollar.
The yuan has weakened more than 5 percent against the greenback so far this year, reflecting growing concerns about the outlook for the world’s No.2.
