China’s state banks have been active in the onshore yuan forwards market this week, using swaps to reduce the supply of dollars, four sources with knowledge of the matter told Reuters.
A trader at a Chinese bank in Shanghai said banks had conducted significant amounts of buy-sell swaps in the onshore market on Tuesday. Buy-sell swaps help to reduce the supply of dollars that the market can access to short-sell the yuan.
“Yesterday big banks were all selling one-year onshore forward swaps, then in the afternoon the spot dollar-yuan fell 100 pips,” said the trader.
Two foreign banks were also seen active in offshore forward swaps, two sources with knowledge of the matter said.