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China's Banks Are Getting Ready for Bigger Swings in the Yuan

  • Deposit-taking institutions boost foreign exchange to record
  • The move puts lenders in good position for fluctuations: BNP
An employee arranges genuine bundles of Chinese one-hundred yuan banknotes at the Counterfeit Notes Response Center of KEB Hana Bank in Seoul, South Korea, on Monday, Aug. 14, 2017. China's factory output and investment slowed somewhat in July, according to data released today, yet the yuan appeared not to take the data as negative, if in fact it's paying attention to it at all.
Photographer: SeongJoon Cho/Bloomberg

While the yuan has been having its best year since 2011 against the dollar, China’s banks continue stocking up on foreign currency in a sign that they are preparing for greater swings in the exchange rate.

Depository corporations -- a majority of which are lenders -- boosted their holdings to 5.39 trillion yuan ($812 billion) in October, up 383 billion yuan so far this year, People’s Bank of China data show. That compares with an increase of 843 billion yuan in 2016, when the yuan slumped 6.5 percent against the greenback. While the country’s official foreign-exchange reserves, which now stand at $3.1 trillion, get greater attention as observers gauge the country’s opaque currency policy, banks are emerging as increasingly important actors.