China’s foreign exchange regulator reportedly phoned several banks to warn against aggressive selling of the Chinese yuan in the midst of a strengthening dollar.
A strengthening dollar from rising rates and a slowing Chinese economy has naturally led some banks to sell the yuan in favor of the greenback. But there are signs that this may be causing discomfort amongst top officials on the mainland.
According to a «Reuters» report citing unnamed sources, China’s State Administration of the Foreign Exchange (SAFE) called up several banks yesterday to warn against aggressively selling the yuan.
The yuan weakened against the dollar to a two-year low of 6.85 with August registering the steepest fall thus far since April when China cut its reserve requirement ratio to bolster the economy.
SAFE Response
In response, SAFE said that it had not observed unreasonable buying of large amounts of foreign exchange in August with stable market supply and demand. It also said that the yuan was relatively resilient compared to other non-US dollar currencies with cross-border flows stabilized by a trade surplus and use of foreign capital.
«Foreign exchange expectations are stable, which helps to keep the yuan exchange rate basically stable at reasonable and balanced levels,» said China’s foreign exchange regulator.
