China central bank intervening to support yuan via state-owned banks: traders

U.S. $100 banknotes and Chinese 100 yuan banknotes are pictured at a branch of a foreign bank in Beijing January 4, 2016. REUTERS/Kim Kyung-Hoon

SHANGHAI (Reuters) - China’s central bank was suspected of intervening in trading to support the yuan via state-owned banks, traders said on Friday.

“State-owned banks were offering dollar liquidity around 6.59, suspected to be on behalf of the central bank,” said a trader at a European bank in Shanghai. “This happened both today and yesterday.”

Early on Friday the central bank strengthened its official rate for the first time in nine trading days.

China allowed the biggest fall in the yuan in five months on Thursday, pressuring regional currencies and sending global markets tumbling as investors feared it would trigger competitive devaluations.

In spot trade, yuan CNY=CFXS opened at 6.5700 and was changing hands at 6.5888 by 0225 GMT (9.25 p.m. ET on Thursday), compared with its previous close of 6.5929.

Reporting by Lu Jianxin and Pete Sweeney; Editing by Kim Coghill