China’s major state-owned banks were seen actively mopping up the offshore yuan on Monday, three people with knowledge of the matter said, as the currency comes under growing pressure from a darkening economic outlook and strain in the property sector, reports Reuters. State banks often act as agents for China’s central bank in the offshore foreign exchange market, but they could also trade on their own behalf or execute their clients’ orders.
Tightening up offshore yuan liquidity could also act to stabilise the yuan, one of the sources said.
The move effectively raised the cost of shorting the Chinese yuan, at a time the local unit is facing mounting depreciation pressure.