In a significant development amid rising trade tensions with the U.S., the People’s Bank of China (PBOC) has asked major state-owned lenders to reduce their U.S. dollar purchases, Reuters reported, citing sources familiar with the matter.
The central bank’s directive comes as the yuan faces renewed downward pressure following President Donald Trump’s sweeping 104% tariffs on Chinese goods and Beijing’s retaliatory measures. The PBOC issued informal “window guidance” to banks this week, advising them to avoid dollar buying for proprietary trading and to tighten scrutiny on client-related dollar purchase transactions.
According to Reuters, China’s top banks were seen actively intervening in the onshore spot market on Wednesday, selling dollars and purchasing yuan to limit the currency’s fall. The yuan has already slipped about 1.3% this month and stood at 7.35 per dollar on Wednesday. The offshore yuan, meanwhile, hit a record low overnight.
Despite mounting pressure on the currency, insiders told Reuters that the PBOC will not allow sharp yuan depreciation, as it could damage market sentiment. “A sharp depreciation will not happen as that could hurt market confidence, but a modest depreciation will help exports,” said one policy adviser. Authorities are reportedly considering other support measures for exporters, including tax rebates and diversification strategies.
The central bank’s priority appears to be maintaining financial market stability over aggressively offsetting tariff impacts through currency devaluation, underscoring Beijing’s cautious approach amid a worsening economic standoff with Washington.
