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State-Owned Banks Seen Selling USD Via Onshore Swap Agreements

CHINA
  • Reuters report that major state-owned banks in China are seen acquiring USD via onshore swaps and selling the USD in spot FX markets this week, according to sources.
  • Not the first time we've seen reports of state-owned banks using onshore swaps to sell spot USD and pressure the USD/CNY rate - back in late August the same strategy was used as Chinese exporters took the other side of the trade: https://marketnews.com/exporter-preference-for-fx-...
  • Back in August, the USD sales were used to counteract a rallying USD/CNY rate - but this week it's the opposite, with state-banks selling into USD/CNY weakness, potentially accelerating declines.

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