China's State Banks Shift Dollar Reserves to Yuan in London and New York
China's major state-owned banks have been actively selling US dollars to buy yuan in both onshore and offshore spot foreign exchange markets in an effort to slow the depreciation of the yuan. This move comes as the yuan has lost about 2.4% against the dollar this month and 6% since the beginning of the year. State banks have been selling dollars during London and New York trading hours to limit falls in the offshore yuan and prevent it from diverging too far from its onshore counterpart. The recent decline in the yuan is attributed to China's widening yield differential with the US, weak economic growth, rising default risks, and the government's slow delivery of stimulus measures. The People's Bank of China (PBOC) has eased monetary policy to support the economy, but this has put more pressure on the yuan. State banks have been repeatedly selling dollars to slow the yuan's decline, and other tactics, such as limiting yuan lending in the offshore Hong Kong market, have also been employed.
