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Hong Kong - China has suspended at least two foreign banks from conducting some cross-border yuan business until late March, according to people with direct knowledge of the matter.
The three-month ban was imposed on Tuesday by the People’s Bank of China, they said, asking not to be identified because they weren’t authorized to speak publicly on the matter.
The clampdown comes as a widening gap between the yuan’s onshore and offshore rates makes it profitable to buy the currency in Hong Kong and sell it in Shanghai. The PBOC didn’t immediately respond to questions regarding the matter, which was reported earlier by Reuters.
The currency is 1.6% weaker in Hong Kong’s freely traded market than it is in Shanghai, the biggest discount in three months. The difference widened to more than 2% following an August 11 devaluation that spurred an exodus of funds from the world’s second-largest economy.
China’s foreign- exchange reserves tumbled by more than $400bn this year as the central bank bought yuan to stem depreciation. The onshore rate has weakened 4.4% this year, poised for the biggest annual decline in more than two decades.
