China’s major state banks seen selling dollars for yuan at around 7.25 level: Report

Major state-owned banks in China sold dollars for yuan in the onshore spot foreign exchange market on Thursday, Reuters reported, quoting sources aware of the matter.

The state banks sold dollars at around 7.25 level, in a move to restrict the decline in the local currency which has lost nearly 5% so far this year, making it one of the worst performing Asian currencies. Yuan was trading at 7.2483 per dollar.

“The state bank dollar selling appeared to prevent the yuan from weakening past the psychologically important 7.25 per dollar level,” the Reuters report quoted a source.

Also Read: DM central banks still hawkish, but EMs set to lead global rate cutting cycle

It was the third time this week that Chinese state banks stepped in and tried to arrest weakness in the yuan.

The state banks in China usually act on behalf of the country's central bank in the foreign exchange market. But, they could also be trading for themselves or their clients.

The People's Bank of China, earlier in the session, set the daily midpoint fixing stronger than expected. 

Analysts believe this move was an official attempt to limit the fall in yuan.

Also Read: US 10 Year Bond Yield End 40-Year Bearish Cycle. Here’s How it Could Impact Your Investments

Meanwhile, among other Asian currencies, Japan’s yen depreciated to a seven-month low of 144.62 per dollar on Wednesday, the levels last seen in November 2022, which had prompted the government to intervene last year to support its currency. The dollar has surged as much as 11.55% since late March against yen.

The fall in yen comes after the Bank of Japan hinted that it would maintain its ultra-easy monetary policy for now, despite other major central banks moving on a tightening trajectory.

The US dollar index - which measures the currency against six major peers, including the yen, euro and sterling - gained 0.22% to 103.20, extending its 0.46% overnight climb.