SHANGHAI (Reuters). China’s top state-owned banks swapped yuan against dollars on Tuesday in the Onshore Forwards Market, according to five sources. This pushed swap points towards negative territory for more than three decades.

Swaps increased dollar liquidity tensions because U.S. yields rose quickly and effectively closed the gap between two of the largest economies in the world.

According to sources familiar with the situation, Reuters was told by persons who knew the details that state banks had been seen trading yuan for dollar in the onshore forwards marketplace. The one-year dollar/yuan swap point dropped to -51 points. It is the lowest level since March 2019

The market has less dollars to buy-sell the Yuan, so it can reduce its supply with buy-sell swaps

Although state banks trade in China’s FX markets on behalf of China’s central bank, they are also able to trade for themselves or place orders on behalf corporate clients.

Sources indicated that access to dollar financing by Chinese overseas banks has been increasing rapidly and FX Swaps had proven very cost-effective.

These tactics were used frequently by state lenders in 2019 to help the Chinese currency. This was due to increasing bilateral trade tensions between China and the United States.

The yuan experienced some downward pressure this time, losing 5.5% against the dollar to trade at an 18 month low on Tuesday.