Investing.com - Earlier in Tuesday's Asian trading session, China's prominent state-backed banks were spotted trading U.S. dollars for Yuan in both domestic and international spot markets, according to knowledgeable insiders. This strategic move seeks to bolster the Chinese currency.
Traditionally, these state-run banks trade on behalf of the nation's central bank within China’s forex market. However, they may also independently engage in such transactions.
This shift towards dollar sales follows a recent commitment by top-tier Chinese leaders to enhance policy backing for their economy as it navigates through a challenging post-pandemic recovery period. The focus is now firmly placed on amplifying internal demand while hinting at further stimulus measures.
Chinese policymakers have additionally stated their intention to maintain a steady exchange rate for the yuan that aligns with balanced and reasonable levels. They are determined to stimulate the capital market and rebuild investor trust.
Currency stability has been highlighted by leading political figures as an area of interest —a first-time occurrence in recent years— which sparked intrigue among HSBC analysts. Their insights suggest that mitigating depreciation pressures on the yuan could become more pivotal as part of future policy considerations - reflecting similar moves made recently by The People's Bank of China (PBOC) aimed at tightening foreign exchange policies.
Lately, monetary authorities have intensified efforts designed to protect their faltering currency value from further decline. In previous weeks, regulators eased regulations permitting businesses greater access to overseas borrowing while PBOC has consistently set daily midpoint guidance rates more robustly than what was predicted by market experts.
As per this strategy, the domestic version of the Yuan appreciated over 0.4% against its American counterpart reaching up high at 7.1411 per dollar during this period but later settled down at around 7.1541 as reported at 0314 GMT zone despite being currently down by approximately 3.5% year-to-date – marking one of Asia’s lowest-performing currencies.
Parallel trends were observed with its offshore equivalent; peaking weekly highs before settling back near similar levels.