Rumor: Chinese State-Owned Banks Are ‘Aggressively’ Buying U.S. Dollars

Vincent Fernando, CFA | Jun. 22, 2010, 3:33 AM | 1,163 | comment 2

cash dollars moneyMaybe this is why the yuan has peculiarly weakened against the U.S. dollarTraders are reporting that Chinese state-owned banks are ‘aggressively’ buying U.S. dollars.

Reuters:

(Reuters) – Chinese state-owned banks are aggressively buying dollars for the yuan on Tuesday, traders said, but it was not clear if the buying was due to Chinese central bank intervention to keep the yuan stable.

Several traders said Chinese state-owned banks were buying dollars at various levels, suggesting they were not trying to defend the yuan at a certain level.

However, Tuesday’s aggressive buying of dollars could cut the supply of the U.S. currency in the spot market in coming days, which may in turn influence the yuan’s value.

Regardless, buying is a form of price support, even if at different levels, and could explain the odd movement of the yuan.

Read more: http://www.businessinsider.com/rumor-chinese-state-owned-banks-buying-dollars-2010-6#ixzz0rbu7ZAuL

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