Tariff war: China’s Central Bank Orders State Banks To Reduce US Dollar Purchases

China’s Central Bank has said it will not allow a significant decline of the yuan.

This is even as the apex bank urged major state-owned banks to scale back US dollar purchases.

Reuters reports that the bank sent the new guidance to state banks this week, urging them to withhold US dollar purchases for their proprietary accounts.

Major banks were also told to step up checks when executing dollar purchase orders for clients, in a move markets view as a way for the central bank to curb speculative trades, the outlet reported.

The order from the central bank comes as the yuan faces heavy downward pressure amid aggressive tariffs on Chinese goods exported to the US

China’s large state banks were seen selling dollars and purchasing yuan aggressively to slow the pace of yuan declines in the onshore spot market on Wednesday, according to the outlet.

Reuters, however, reported that China’s central bank will not resort to yuan devaluation to cushion the blow from tariffs on exports and the overall economy.