Jan 31 Reuters China39;s major stateowned banks were heavy sellers of dollars on Wednesday, three people with direct knowledge of their activity said, steadying the yuan as it came under pressure in currency trade as the economy remains shaky.

State banks often act on behalf of China39;s central bank in the foreign exchange market, but they could also trade on their own behalf or execute clients39; orders.

One of the people said the selling was very forceful to defend the yuan at around 7.1820 per dollar in the onshore spot market.

All the sources spoke on condition of anonymity as they are not allowed to publicly discuss market conditions.

The state bank actions come as the yuan faces renewed downside pressure from foreigners39; rush out of China39;s sinking equity markets and a globally resurgent U.S. dollar.

With a 1 fall, the yuan is headed for its largest monthly drop on the dollar in five months and the bluechip CSI 300 equity index notched a record sixth consecutive monthly loss on Wednesday.

Investors are gloomy about China39;s growth prospects, frustrated at the lack of a largescale rescue for the embattled property sector and exhausted by several years of underperformance.

Only the bond market is a bright spot which is putting further pressure on the yuan as 10year Chinese government bond yields sank to twodecade lows on expectations that there39;ll be more monetary easing to prop up the economy.

The state bank action effectively put a floor under the…