US dollar under heavy selling in Shanghai

The amount of US dollars sold on the Shanghai foreign exchange market has been rising sharply in recent months amid fears of a further decline in the value of the greenback against major currencies, the Securities Times reported.

The newspaper said that at the Shanghai branch of Bank of China, individual clients sold a total of US$180 million in August, while the figure rose by 17 percent in September and 34 percent in October.

Increased selling of the US dollar was also seen in other cities, the paper noted. By the end of October, the value of foreign exchange transactions had risen 30 percent to US$75.92 billion at the Industrial and Commercial Bank of China, one of the four largest national banks in China.

Recent speculation that Beijing will shift the current yuan-dollar peg to a higher level also gave local investors an excuse to get rid of their dollar holdings, the paper said. Currently the yuan is allowed to float only within a narrow range around 8.3 yuan per dollar.

By the end of October, financial institutions in China had a total of 83.6 bln USD in foreign-currency deposits, a 3.8 slip from the same month last year, the paper said, citing figures released by the country¡¯s central bank. A Shanghai-based currency trader said similar selling was also seen in the futures market, as local enterprises try to avoid further losses if the US currency continues to fall, the paper reported.

In October, the average daily volume of interbank foreign exchange transactions topped US$1billion, of which trading in US dollars grew 33.5 percent from the same month last year, according to the paper.

The Chinese Gvernment has repeatedly said it would keep the exchange rate stable. It is understood that a large amount of Chinese foreign exchange reserve is in the form of U.S. dollars.

Source: Shenzhen Daily-Agencies