Chinese Banks Trading US Dollars to buy Chinese Yuan, attempting to Reduce Yuan Fall

People with direct knowledge of the situation said that China's major state-owned banks were seen busy selling US dollars to buy yuan in both onshore and offshore spot foreign exchange markets this week, attempting to halt the yuan's rapid losses.

State banks typically act in the foreign exchange market on behalf of China's central bank, but they may also trade on their own behalf or execute orders placed by their clients.

On Aug 17, two sources with direct knowledge of the matter said that offshore branches of state banks were seen selling dollars during London and New York trading hours this week.

Such dollar selling could keep the offshore yuan from deviating too far from its onshore counterpart.

Meanwhile, according to two separate sources, state banks offered dollars in onshore foreign exchange markets.

According to one of the sources, the dollar selling was done primarily to "control the pace of yuan depreciation."

As of 0205 GMT, the onshore yuan was worth 7.3096 per dollar, while the offshore yuan was worth 7.3356.