July 20, 2018 / 3:39 AM / a month ago

China state banks seen selling dollars in FX markets as yuan slides- traders

SHANGHAI, July 20 (Reuters) - Major state-owned Chinese banks were seen selling dollars in both onshore and offshore foreign exchange markets on Friday, three traders said, in an apparent attempt by authorities to prevent the Chinese currency from sinking too rapidly.

“Big banks were offering dollar liquidity onshore and offshore, instead of only selling onshore as what they used to do. In this case, it could have a better effect,” said one of the traders.

Another trader said he saw state banks selling dollars onshore at around 6.81 per dollar.

All of the three traders said the amount of dollar selling was not huge, and they interpreted the selling as a move aimed at controlling the pace of depreciation of the yuan, which has been battered over the past several week by a heated Sino-U.S. trade dispute.

The spot market opened at 6.7950 per dollar on Friday, weakened past 6.8 per dollar to a low of 6.8128 at one point.

As of 0330 GMT, it was trading at 6.7934.

Its offshore counterpart was trading at 6.8156 per dollar.

State-owned banks sold dollars in the forex market regularly in late 2015 and 2016 in what some traders believed was part of official efforts to prop up the Chinese currency.

Reporting by Winni Zhou and John Ruwitch Editing by Shri Navaratnam

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