China’s state banks step in to arrest yuan slide after key level breached, sources say

CHINA’S major state-owned banks were seen selling dollars on Friday, two people with knowledge of the matter said, in an attempt to arrest weakness in the yuan after it slumped to the lowest level in more than four months.

Chinese state banks quickly stepped into the market to actively sell dollars for yuan after the local currency weakened past the psychologically important 7.2 per dollar to lows of 7.24, the sources said.

The sources declined to be identified because they were not authorised to speak publicly about market trades.

The onshore yuan trimmed losses and last traded at 7.2228 per dollar as of 0243 GMT.

The sudden yuan weakness comes at a time markets have raised their expectations for further monetary easing to prop up growth in the world’s second-largest economy.

Moreover, the dollar has also been rising broadly after the Swiss National Bank cut its main interest rate by 25 basis points on Thursday, a surprise move which made it the first major central bank to dial back tighter monetary policy aimed at tackling inflation. REUTERS