China's major state-owned banks are busy selling US dollars to buy yuan in both onshore and offshore currency markets, Reuters reported.
These financial operations conducted by Chinese lenders are reportedly aimed at staving off a collapse in the national currency.
Banks not only trade on their own behalf but execute their clients' orders. The actions they take have been endorsed by the central bank. The regulator believes that state bank dollar selling is the best solution to quell fears of a possible crash in the yuan, which is already under pressure.
This month, the Chinese currency has slid by 2.4% against the greenback. Since the start of the year, the yuan has lost nearly 6%. As of today, the onshore currency was last seen trading at around 7.3145 per dollar, while the offshore yuan was near 7.3400 per dollar.
According to experts, the yuan's steep losses can be attributed to a significant income gap between China and the United States. Investors' concerns over frail economic growth in China, the risk of default in the country’s property sector, as well as shadow banking activities are adding fuel to the fire.
