Chinese authorities moved to shore up the yuan by banning Chinese banks from certain offshore lending activities, according to Reuters, citing sources with direct knowledge of the matter. Banks may no longer deposit and lend yuan offshore through free trade zone schemes, the report said, which would in turn limit liquidity in the offshore yuan, making it more expensive to short it and pushing it higher. The move compares to action by the Hong Kong Monetary Authority in April, in which liquidity in the banking system was reduced to shore up the Hong Kong dollar USDHKD, -0.0025% China's yuan sold off against the dollar for much of this year, weakening more than 5% in the year to date, according to FactSet. While many analysts attributed the yuan weakness to concerns about a trade war between the U.S. and China and general weakness across emerging markets currencies, others are worried about a devaluation akin to that of 2015, which jolted markets. On Thursday, the yuan rallied against the U.S. dollar. One dollar last bought 6.8726 yuan offshore USDCNH, -1.2308% down 1.1%, and 6.8890 yuan in Beijing USDCNY, -0.7484% down 0.7%.
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