China's State-Owned Banks Exchange Dollars For Yuan To Bolster Currency: Report

State-owned banks in China have been observed trading U.S. dollars for yuan in an effort to support the Chinese currency.

What Happened: On Tuesday, major Chinese banks were witnessed swapping yuan for dollars in the onshore swap market and selling those dollars in the spot market, sources with knowledge of the situation told Reuters.

This move comes as the Chinese yuan saw a 2.55% increase against the dollar in November, marking its best month of the year, though it remains down 3% year-to-date.

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Insiders believe these actions by state banks are aimed at speeding up the yuan’s recovery and incentivizing domestic exporters to convert their foreign exchange receipts into the local currency as the year-end approaches.

It is common for Chinese state banks to act on behalf of the country’s central bank in the foreign exchange market, but they also conduct trades for their own benefit. Similar trading activity was noticed late last month, which contributed to the yuan’s recovery against a generally weaker U.S. dollar.

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