China's state banks are buying dollars amid rapid gains in the yuan, sources say By Reuters

SHANGHAI/BEIJING (Reuters) – Central state banks were buying dollars in China's foreign exchange market on Friday to slow the yuan's rise, four people with knowledge of the matter said.

The bank moves come as the yuan strengthened to an eight-month high of 7.0895 per dollar, breaking chart resistance at 7.1 and erasing year-to-date losses. The people asked not to be identified because they are not authorized to speak publicly about market issues.

China's state-owned banks usually work for the central bank in the country's foreign exchange market, but they can also trade on their own.

Reuters reported last week that Chinese authorities have worked behind the scenes to ensure that the currency does not rise suddenly, which could disrupt fragile domestic financial markets and hurt exporters.

Markets are also focused on whether the currency's sharp gains could prompt exporters to start converting roughly $500 billion in accumulated receipts into yuan.

The yuan traded at 7.0936 per dollar as of 0625 GMT.