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China state banks seen mopping up dollars through yuan forwards - sources

SHANGHAI/SINGAPORE, Aug 7 (Reuters) - China's state banks have been active in the onshore yuan forwards market this week, using swaps to reduce the supply of dollars, four sources with knowledge of the matter told Reuters.

A trader at a Chinese bank in Shanghai said banks had conducted significant amounts of buy-sell swaps in the onshore market on Tuesday. Buy-sell swaps help to reduce the supply of dollars that the market can access to short-sell the yuan.

"Yesterday big banks were all selling one-year onshore forward swaps, then in the afternoon the spot dollar-yuan fell 100 pips," said the trader.

Two foreign banks were also seen active in offshore forward swaps, two sources with knowledge of the matter said. (Reporting by Winni Zhou and Andrew Galbraith; Editing by Sam Holmes)