SHANGHAI/SINGAPORE - China’s state banks have been active in the onshore yuan forwards market this week, using swaps to tighten dollar supply and support the Chinese currency, four sources with knowledge of the matter told Reuters.
The spot value of the yuan has fallen sharply this week against the dollar as tensions between China and the United States escalated and prompted fears that their trade war could shift into a currency war. “Yesterday big banks were all selling one-year onshore forward swaps, then in the afternoon the spot dollar-yuan fell,” said a trader at a foreign bank in Shanghai.
On Wednesday, one-year onshore dollar-yuan forwards were at 175 points, down from 321 points on Monday CNY1Y=, according to Refinitiv data. One-year offshore dollar-yuan forwards CNH1Y=were at 459 points, down from 640 points on Monday.
Photo says it all, really