Major state-owned Chinese banks were seen selling dollars at around 6.97 per dollar in the onshore spot foreign exchange market in early trade on Tuesday, three traders said, in an apparent attempt to arrest sharp losses in the local currency.
The onshore spot market opened at 6.9681 per dollar, weakening to a low of 6.9703 at one point in early deals.
“Big banks were selling (dollars) to defend the yuan,” said one of the traders.
The move by the state-run banks helped the yuan recover to 6.9550. The onshore spot yuan was trading at 6.9645 as of 0237 GMT.
Traders attributed the sharp morning losses in the yuan to broad strength in the U.S. dollar .DXY, which hit 16-month highs against a basket of six other major currencies. [FRX/]
They also suspect the authorities are keen to prevent the yuan from weakening too sharply before U.S. President Donald Trump and his Chinese counterpart President Xi Jinping’s meeting later this month.
The two countries’ leaders plan to meet on the sidelines of a G20 summit, in Argentina at the end of November for a high-stakes talk.