China’s state banks are buying dollars amid rapid gains in the yuan, sources told Reuters

SHANGHAI/BEIJING (Reuters) – Major state banks were buying dollars from China’s onshore foreign exchange market on Friday to slow the yuan’s rise, four people familiar with the matter said.

Bank shares come as the yuan strengthened to an eight-month high of 7.0895 per dollar, breaking chart resistance at 7.1 and erasing year-to-date losses. The people requested anonymity because they are not authorized to speak publicly about market issues.

China’s state-owned banks usually act on behalf of the central bank in the country’s foreign exchange market, but may also trade on their own behalf.

Reuters reported last week that Chinese authorities have been working behind the scenes to ensure the currency does not rise sharply, which could hurt fragile domestic financial markets and hurt exporters.

Markets are also very focused on whether the currency’s significant gains could prompt exporters to start converting the estimated $500 billion in accumulated receipts into yuan.

The yuan traded at 7.0936 per dollar at 0625 GMT.