China loosens gold import quotas with eye on arresting yuan rally

BEIJING/SHANGHAI, May 8 (Reuters) - China's central bank has approved foreign exchange purchases by some commercial banks to pay for gold imports under recently increased quotas, two people with direct knowledge of the matter said on Wednesday.

The People's Bank of China's (PBOC) gold import quotas for the country's big banks determine how much bullion enters the world's leading consumer of the precious metal. It has in the past tweaked these quotas to help calibrate demand for dollars.

The sources said the PBOC raised such quotas for gold imports last month and has now also allowed the banks to buy the dollars to fund these gold imports.

The move could help lenders meet a significantly increased appetite for gold while slowing the pace of yuan appreciation, one of the sources said.

The new quotas come at a time when gold XAU= has rallied sharply against the backdrop of market volatility induced by U.S. President Donald Trump's trade war.

That has also driven the yuan CNY=CFXS and other Asian currencies higher as investors unwind carry trades or move money out of U.S. assets and back into Asia.

The sources spoke on condition of anonymity because they are not authorised to talk about the matter.

The PBOC did not respond to a Reuters request for comment.