Connect with us

Popular World News

Chinese state banks seen using FX swaps to absorb dollars, sources say By Reuters

China forms new insurance group to take over Anbang


Chinese state banks seen using FX swaps to absorb dollars, sources say By Reuters

© Reuters. FILE PHOTO: U.S. one hundred dollar notes are seen in this picture illustration

SHANGHAI (Reuters) – At least one major state-owned Chinese bank is conducting large currency swaps in mainland markets, possibly as part of efforts to cap the yuan, as domestic banks deal with a heavy influx of dollars, eight sources with knowledge of the matter told Reuters on Tuesday. The sources said the bank was seen conducting sell-buy swaps in the dollar-yuan pair, alongside its purchases of dollars from exporters and other corporate clients. They suspected the swaps were aimed at getting around monthly quotas on the amount of foreign currency banks can buy, by transferring some of those dollar purchases onto their forward books. “The big bank has been buying quite huge amounts of one-year dollars in the swap market,” said one source, speaking on condition of anonymity. Another source said other banks had also been using swaps to disperse their dollar buying into the future. The trades have pushed one-year dollar/yuan swap points to 1,750 points, from lows of around 1,610 last week. One-year yuan has dropped to 6.68 per dollar, from around 6.63 a week ago. As China recovered rapidly from the coronavirus pandemic and saw exports boom, it recorded a huge trade surplus of $535.03 billion last year, the highest since 2015. That, analysts said, was the reason for a rush among corporations to convert their dollars into yuan, before it appreciates further. The currency is up almost 5% since the end of September 2020. China’s FX reserves have, however, barely moved in the past few years, staying just above the $3 trillion mark. Economists and analysts said the People’s Bank of China’s net foreign-exchange purchases have stayed steady in recent months, suggesting commercial banks might not have swapped the dollars they acquired from their corporate clients with the central bank. Instead, these dollars flowed to the interbank market.
“It’s possible that the foreign exchange from corporates has been transferred to the swap market, and it would not appear in data,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source link

Continue Reading
You may also like...
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


To Top
error: Content is protected !!