(Bloomberg) -- Chinese investors are taking a different approach to trading the yuan, a change strategists say is helping curtail sharp moves in the currency.
From late 2015 through 2018, China’s firms and households mostly added to the yuan’s momentum in either direction, buying foreign currencies when the yuan was weak and vice versa, data compiled by Bloomberg show. Lately, they’re doing the opposite. They sold foreign-exchange when the yuan was low on bets that Beijing will halt depreciation to avoid capital outflows.
“The change in how bank clients trade the yuan has helped stabilize the currency and reduces the need for the central bank to intervene,” said Ji Tianhe, a Beijing-based strategist at BNP Paribas (PA:BNPP) SA. It also shows Chinese investors have become more experienced in dealing with yuan swings than in previous years, he added.
Chinese companies and individuals net sold the yuan at banks in the three months through April this year, according to data from the State Administration of Foreign Exchange. That selling came as the currency traded close to the strongest level since July 2018. They bought the yuan when it tumbled the most in 10 months in May.
A lot of bank clients now buy the yuan when it’s close to 6.9 per dollar, according to traders who asked not to be named publicly commenting on the market. Some analysts have seen that level as the government’s line in the sand for weakness.
Yuan volatility has disappeared since mid-June, as investors assess the China-U.S. trade dispute deadlock and uncertainty over monetary policy. A gauge of one-month historical swings in the currency was the lowest among 30 major exchange rates on Thursday.
Still, looming events such as more trade negotiations next week and a potential interest-rate cut by the Federal Reserve this month will likely get traders busy once again.
To contact Bloomberg News staff for this story: Qizi Sun in Beijing at qsun62@bloomberg.net;Tian Chen in Hong Kong at tchen259@bloomberg.net
To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Philip Glamann, David Watkins
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