SHANGHAI, March 22 Reuters China39;s yuan declined to a fourmonth low against the dollar on Friday, breaching a key threshold and prompting stateowned banks to step in to defend the currency.

In the spot market, the onshore yuan fell to the weak side of the psychologically important 7.2 per dollar level to hit a low of 7.24, its softest since Nov. 17, 2023.

Market sources told Reuters that state banks stepped in subsequently to buy the yuan for dollars. The yuan was at 7.2251 by midday, 257 pips softer than the previous late session close.

The sources declined to be identified because they are not authorised to speak publicly about market trades.

The yuan has fallen more than 2 in three months, and has been pressured by growing market expectations of further monetary easing to prop up the world39;s secondlargest economy as well as a weaker Japanese yen .

Carlos Casanova, senior economist for Asia at UBP, said the strengthening dollar and sharp depreciation in the yen and some Asian currencies after the Bank of Japan ended its negative interest rate policy, have weighed on the yuan.

The market seems to have interpreted Asian currencies should depreciate further against the U.S. dollar until the Dday of interest rate cuts by the Fed, he said.

Prior to the market opening, the People39;s Bank of China PBOC set the midpoint rate , around which the yuan is allowed to trade in a 2 band, at 7.1004 per dollar, 62 pips weaker than the previous fix of 7.0942.

The Chinese…