Chinese banks' dollar purchases via swaps from clients hit record high in Jan

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SHANGHAI/SINGAPORE : Chinese banks purchased the most dollars from their clients via FX swaps in January, official data from the FX regulator showed on Monday, suggesting exporters preferred to only temporarily acquire the local currency while holding on to dollars.

FILE PHOTO: Chinese Yuan and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

The data shows exporters are increasingly turning to the swap market to convert their overseas earnings and remittances into yuan, rather than outright dollar selling, as they seek higher returns on dollars and wait for better exchange rates. Heightened interest in using the FX swaps to temporarily acquire the yuan comes as yield differentials between the world's two largest economies widened in January, as market participants pushed back on the timing of interest rate cuts in the United States to drive the dollar higher.

 

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