Breaking News
Investing Pro 0
Extended Sale! Save on premium data with Claim 60% OFF

China steps in to stem yuan slide, shore up confidence

Published Jun 27, 2023 03:27AM ET Updated Jun 27, 2023 09:17AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: Coins and banknotes of China's yuan are seen in this illustration picture taken February 24, 2022. REUTERS/Florence Lo/Illustration/File Photo
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio

SHANGHAI/BEIJING (Reuters) - China's monetary authorities took forceful action against a sliding currency for the first time in nearly eight months on Tuesday, with the country's state banks acting to put a floor under the yuan even as officials pledged more stimulus for the flagging economy.

The People's Bank of China (PBOC) set a stronger-than-expected trading band for the yuan and state banks sold dollars, market sources said, in the strongest sign yet the authorities are growing increasingly uncomfortable with the yuan's quickening slide.

The yuan has fallen about 4% on the dollar in two months as flagging consumer confidence and a soggy property market have sapped momentum from the post-pandemic recovery. It bounced about 0.4% on Tuesday, its best gain in almost two weeks.

"There is weariness that the yuan weakness may have got to the point where the currency weakness could affect confidence that in turn fuels currency weakness, and there is a need to kind of make sure that we don't spiral into that kind of a situation," said Moh Siong Sim, a currency strategist at Bank of Singapore.

"They are sending more signals now they're uncomfortable... they would like to slow the yuan weakness."

The push back comes as investors sour on China, with data showing China's vaunted rebound faltering. Still, the stuttering recovery has stoked expectations of stimulus to help offset growth worries, something even mainland authorities have been more vocal about.

Addressing a World Economic Forum summit in Tianjin, Premier Li Qiang said China will take steps to boost demand and invigorate markets, although he didn't provide details.

Analysts said the PBOC's massaging of the yuan's moves could slow but perhaps not halt a decline, given the dour economic outlook. Wall Street bank JPMorgan (NYSE:JPM) said it was staying "bearish" on China's yuan and expected the central bank to step in again to prevent the move accelerating.

China is not alone with unease at its currency's downward momentum, driven in major part by widening yield differentials with the hawkish monetary regimes in other major economies.

Japan's finance ministry has also issued warnings this week at what it sees as a rapid and one-sided yen decline, and top yen diplomat Masato Kanda said he is "not ruling out any" options to arrest the near 10% decline in the yen in a matter of weeks.


The yuan ended Monday at a seven-month low of 7.2425 per dollar but rose to 7.2058 on Tuesday.

State banks were selling dollars to buy yuan in the offshore spot market, according to four people familiar with the trades, and that appeared as the currency neared the psychologically important 7.25 per dollar level, two of the people said.

The banks were also active late on Monday, according to two more traders, when they bid up the yuan sharply into the onshore close, which influences the central bank's official yuan midpoint fixing the next day.

On Tuesday, the People's Bank of China (PBOC) set the middle of the band even firmer than expected, deviating from forecasting models by the most since May.

"The 7.25 level remains a key threshold," said one of the market sources, adding that a breach of the level could quickly send the yuan to lows last seen in 2022.

In November, the currency hit a 14-year trough of 7.3280 per dollar, while the offshore yuan touched a record low of 7.3746.

All the sources spoke on condition of anonymity as they are not authorised to speak about trades publicly. UBS said in a note that its trading desk saw heavy interest among banks in pre-market trades to procure dollars via buy-sell currency swaps, and said there might have been efforts by the authorities to neutralise the impact from their spot intervention.

State banks were also suspected of smoothing the yuan's decline last month, albeit minimally.

State banks usually act on behalf of the country's central bank in the foreign exchange market, but they could also be trading for themselves or their clients.

"What could really stabilize the Chinese currency is... they probably need to stabilize the growth expectations. There is a need to address that worry," Sim said.

Analysts said moves to halt the yuan's slide were not yet as firm as last year, when regulators rolled out measures to encourage capital inflows, but might be enough to slow selling.

Still, both stimulus and efforts to put a floor under yields are needed, analysts say, to keep the yuan from slipping further.

"We've got to be thinking about the likelihood of further easing ahead," said Rob Carnell, ING's regional head of research, Asia-Pacific.

"What we've seen is just the first iteration of the rate cuts that we're going to get. We're going to get plenty more of those over the next couple of months," said Carnell.

"That's got to keep yuan on the back foot."

China steps in to stem yuan slide, shore up confidence

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email