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HomeEconomyChina's sole regulator warns banks against selling yuan - sources

China's sole regulator warns banks against selling yuan – sources

SHANGHAI/BEIJING (Reuters) – China’s foreign exchange regulator called banks on Wednesday to warn them not to sell the yuan aggressively, a new sign of official unease over recent yuan weakness, according to people with direct knowledge of the matter. Signs.

The yuan has been falling against the dollar, and market participants said the call suggested authorities may be uneasy about the pace of the yuan’s slide. The yuan rose to 6 in offshore trades after news of the conference call was released by Reuters. 8605.

The yuan hit a two-year low of 6. 8704 Earlier Wednesday, August had fallen about 1.8% so far, partly reflecting the dollar’s rise as U.S. interest rates rose, but also reflecting the reaction to a slowing economy in China.

“The over-buying of dollars ended up causing the central bank to get a call,” said a source at a bank.

Four people familiar with the call requested anonymity because they were not authorized to discuss it publicly. Nor did they provide further details about the phone. In August when market supply and demand were stable, we did not see any unreasonable large-scale purchase of foreign exchange by institutions. China’s strong trade surplus and utilization of foreign capital continue to play a fundamental role in stabilizing cross-border flows.

“The foreign exchange is expected to be stable, which is conducive to the basic stability of the RMB exchange rate, which is a reasonable and balanced level,” the State Administration of Foreign Exchange said in an emailed statement to Reuters.

Earlier on Wednesday, Chinese state media quoted market analysts as saying there was no basis for a long-term depreciation of the yuan, but officials have so far remained openly mum on market moves.

Ken Cheung, chief operating officer of Asia FX Strategists at Mizuho Bank said the regulator’s move indicated that expectations for yuan depreciation had begun to rise.

“The authorities may want to stabilize market expectations before guiding an orderly weakening of the yuan,” Zhang said.

Recent economic indicators point to a sluggish Chinese economy, with the latest wake-up call being a record number of jobless claims in June.

The country’s strong Exports – the only bright spot – could also come under pressure from weaker global demand.

Outflows from bond markets and an unexpected cut in two key interest rates last week also added to the yuan’s strength pressures, as yields and policy rates differ from other large economies, where inflation is rising rapidly.

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