China's state banks observed selling dollars for yuan in London & New York hours

In an attempt to slow the yuan's depreciation, Chinese state-owned banks were observed selling U.S. dollars to purchase yuan in foreign exchange markets.

State banks frequently act at the direction of the central bank when the yuan is under pressure, as it is now, even though they also trade on their own behalf or carry out clients' orders.

One trader in Shanghai claimed that the Chinese state banks' dollar sales have evolved into the new norm in an effort to slow the rate of the yuan's depreciation.

This week, during London and New York trading hours, state bank offshore branches were also observed selling dollars, according to two sources with direct knowledge of the situation on Thursday.

Such dollar selling could restrict yuan declines and stop it from deviating too much from its onshore counterpart.

Since the beginning of the year, the yuan has lost around 2.4% against the dollar. As of 0442 GMT, the onshore yuan was at 7.3145 per dollar, while the offshore yuan was worth 7.3400.

The recent steepening of the yuan's slide is due to China's widening yield gap with the United States, as well as investors' growing concerns about China's sluggish economic growth and rising default risks in its property and shadow banking sectors.

Investors have been dissatisfied by the government's delayed implementation of stimulus measures to boost GDP. Meanwhile, the People's Bank of China (PBOC) has loosened monetary policy to help the economy, despite the cost of lower interest rates and increased yuan pressure.