China moves to support yuan as stock markets tumble: Report

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China's major state-owned banks moved to tighten yuan liquidity in the offshore foreign exchange market on Monday (Jan 22), actively selling US dollars onshore, four sources with knowledge of the matter said.

The goal was to prevent the yuan from falling too fast as China's A shares plunged, said one of the people. Offshore yuan tomorrow-next forwards jumped to a more than two-month high of 4.25 points, reflecting signs of tighter liquidity conditions. The benchmark Shanghai Composite index lost 2.7 per cent on Monday, posting the biggest one-day drop since April 2022.

State banks often act on behalf of China's central bank in the foreign exchange market, but they could also trade on their own behalf or execute clients' orders.

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