Major Chinese banks supporting yuan by selling USD

The downturn of the Chinese yuan underscores investor concerns vis-a-vis the growing trade row between the United States and China. On July 6, U.S. tariffs on $34 billion worth of Chinese goods are set to kick in.

On Tuesday, according to four forex traders, major state-owned Chinese banks were seen helping support the Chinese yuan by swapping it for the dollars in forwards and immediately selling them in the spot market.

The sale of the dollar acted as a support base to firmer grounds to 6.7 per dollar.

Early trade on Tuesday saw the spot rate of the yuan fall as low as 6.7204, its lowest since Aug.7, 2017.

The downturn of the yuan comes ahead of July 6, the date on which U.S. tariffs on $34 billion worth of Chinese goods kick in.

Beijing has stated, it will retaliate with tariffs on U.S. products.

“Swap points were falling sharply, as big banks were offering,” said a trader.

On Tuesday morning, 1-year tenor of the dollar/yuan swap fell to 248 points, compared with the previous close of 360 points.

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