Chinese State Banks Intervene to Curb Yuan Rally with Aggressive USD Purchases
Chinese state-owned banks have launched a coordinated dollar-buying spree this week, deploying heavy volumes in the onshore spot market to temper the yuan's 14-month peak. The intervention marks a tactical shift—unlike previous operations, banks abstained from recycling dollars through swaps, instead tightening liquidity to raise the cost of long yuan positions.
The yuan's 3.3% year-to-date surge against the greenback, its strongest performance since the 2020 pandemic crisis, prompted the move. Market sources indicate the People's Bank of China likely orchestrated the purchases through proxy banks, aiming to moderate—rather than reverse—the currency's ascent. Thursday's transactions alone knocked the yuan back to 7.07 per dollar, a 0.1% retreat from its recent high.
This calibrated pressure reflects Beijing's balancing act: discouraging speculative yuan accumulation by exporters while gradually advancing the currency's global role. The PBOC's measured approach suggests tolerance for gradual appreciation, provided volatility remains contained.
