SHANGHAI, Nov 17 (Reuters) – The yuan finished its domestic session at a near 29-month high on Tuesday, despite dollar buying by major state-owned banks in what some traders suspected was an effort to slow the Chinese currency’s advance on the 6.5-per-dollar level.
Having begun the day at 6.5720 per dollar, the onshore spot yuan ended domestic trading session at 6.5580, its strongest close since June 26, 2018.
“The authorities are making a lot of effort to prevent the yuan from rising too fast,” said a trader at a Chinese bank.
It remained inconclusive whether the state banks were acting at the behest of the People’s Bank of China, as some traders said they also saw state banks selling dollars.
The Chinese yuan has gained nearly 9% against the dollar since late May, despite the PBOC taking various actions to temper its strength, including suspending FX forward risk reserves and phasing out the counter-cyclical factor in daily midpoint fixing.
Traders attributed Tuesday’s strength in the yuan to the dollar’s weakness globally as investors fretted over the economic havoc the coronavirus pandemic could inflict before a vaccine can be rolled-out.
A Reuters poll showed that the near-term economic recovery was slowing more than previously thought, with the coronavirus seen as a bigger risk to the U.S. economy than a prolonged dispute over the presidential election result.
Reporting by Winni Zhou and Andrew Galbraith; Editing by Sam Holmes & Simon Cameron-Moore