China’s yuan holds steady as PBOC plans to start new liquidity operations

SHANGHAI: China’s yuan held steady against the dollar on Monday as the central bank’s latest move to take more control over interest rates blunted corporate demand for foreign exchange.

China’s central bank said on Monday it would start conducting temporary bond repurchase agreements or reverse repos, a move seen by market participants and traders as to give the bank more leeway to manage cash conditions and interest rates amid hot demand for bonds.

Monetary policy divergence with other major economies, particularly the United States, has been one of the key factors weighing down the Chinese currency over the past few years. The central bank’s recent moves, including possible selling of treasury bonds, could prevent the yield gap from widening further.

China’s one-year dollar/yuan swaps, a gauge that measures market expectations of yield premium between the world’s two largest economies, bounced on Monday.