SHANGHAI/BEIJING: China’s currency regulators are asking some commercial banks to reduce or postpone their purchases of US dollars in order to slow the yuan’s depreciation, two people with direct knowledge of the matter said.
The informal instruction, or the so-called window guidance, is the latest in a series of steps taken by authorities this year to bolster a currency that has been hit by China’s faltering post-pandemic economic recovery and rising yields for the US dollar and other major currencies.
One source said regulators were emphatic banks should hold off dollar purchases under their proprietary trading accounts due to the “recent yuan depreciation”.
The People’s Bank of China (PBOC) did not immediately respond to a Reuters’ request for comments, while the State Administration of Foreign Exchange (SAFE) told Reuters that exchange rate expectations were stable and it will push for a ‘risk-neutral’ mentality’ at companies and financial institutions.
“The yuan exchange rate expectations are stable, and the foreign exchange market has the foundation to meet authentic and compliant FX needs,” SAFE said in response to a Reuters query.
It reiterated it will keep the yuan basically stable at reasonable and balanced levels.
The tightly managed yuan hit an eight-month low in July, and has lost 3.6% against the dollar since the start of the year to rank as one of Asia’s worst performing currencies.
China’s authorities have pledged to let market factors dictate the yuan’s moves, but their concern evident last month when the policy-making Politburo made a rare reference to the need for currency stability.
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