Forex Top Team

China Strengthens Exchange Rate Intervention to Prevent Rapid Depreciation

 

Chinese authorities have reportedly instructed state-owned banks to enhance intervention in the foreign exchange market this week, aiming to prevent rapid fluctuations in the value of the Chinese yuan (CNY). According to sources familiar with the matter, the move is intended to curb significant depreciation of the yuan.

Authorities are also said to be considering various measures, including lowering the minimum requirements for foreign exchange reserves held by commercial banks, to prevent abrupt yuan depreciation. Sources who disclosed this information requested anonymity since they lack authority to discuss such matters.

The directive from Chinese authorities comes as the yuan has been declining towards the level of 7.35 CNY per US dollar, a level closely monitored by top leadership, according to insiders.

Furthermore, authorities are reportedly investigating whether domestic companies have engaged in speculative trading activities that may have accelerated the decline of the yuan.

The People’s Bank of China, the country’s central bank, has yet to respond to requests for comments on this intervention.

(Source: Bloomberg)

This intervention by China is likely to influence USD selling tendencies.