The PBOC sets the yuan’s mid-point at 7.1668 and injects 209 billion yuan through repos.

    by VT Markets
    /
    Jun 25, 2025
    The People’s Bank of China (PBOC) sets the daily midpoint for the yuan, also known as renminbi or RMB. The PBOC uses a managed floating exchange rate system, which allows the yuan’s value to change within a +/- 2% range around this midpoint. Today, the USD/CNY midpoint is set at 7.1668, while the estimate was 7.1709. The previous close was 7.1712. The PBOC injected 365.3 billion yuan into the market using 7-day reverse repos at a 1.40% interest rate. With 156.3 billion yuan maturing today, this means there is a net injection of 209 billion yuan. This morning’s midpoint fix shows how the central bank is managing the currency. By setting the yuan at 7.1668 instead of the higher 7.1709, the PBOC subtly leans towards strengthening the currency. While this change is small, it’s intentional, aiming to influence sentiment without causing a major shift. The recent close of 7.1712 indicates that the market is slightly weaker than the reference point. This means the fix suggests a strengthening perspective, but spot prices are showing some hesitance. The slight difference indicates that demand for dollars is still stronger than local interest in yuan. With today’s operations, the PBOC injected 365.3 billion yuan through 7-day reverse repos, which is much higher than the 156.3 billion yuan maturing. This 209 billion yuan increase shows a clear commitment to keeping liquidity high. The stable 1.40% rate supports funding costs without signaling any major policy changes. For those watching closely, this deliberate injection, along with a midpoint fix that is stronger than expected, indicates a careful balancing act by the authorities. They are providing ample liquidity but without excess. They are sending clear guidance on the exchange rate while managing internal liquidity and external currency pressures. In the coming days, we can expect a heightened sensitivity in short-term interest rate products, especially those related to repo and short-term swaps. The focus on maintaining smooth liquidity through reverse repos means we must be quick to adjust rate positions in response to any shifts in the debt market or interbank stress. A fix slightly below expectations often suggests a desire to limit declines in the yuan. Recently, we’ve seen this align with somewhat firmer onshore short-dated options, particularly those spanning one to two weeks. So, pricing for upside protection in USD/CNY may continue to find support, although a major repricing is not expected—at least for now. As liquidity injections continue above the amounts rolling off into the early part of the quarter, we should watch for any changes in reverse repo volumes. A significant reduction in these injections would suggest a move away from the currently supportive stance. In contrast, increased volumes, especially if combined with stronger-than-expected midpoint fixes in the future, would point to a stronger short-term stabilization effort. Regarding derivatives execution, there’s a chance to keep things steady, but we must not be complacent. If there are sudden moves outside the expected fix range, especially during larger liquidity drains or increases in short rate premiums, we may need to quickly reassess our risk appetite. The gap between expectations and actual fixings provides a clear measure of risk that needs careful attention. Finally, today’s net liquidity boost changes the front-end funding curve, making it flatter near the 7-day mark. This slight shift makes very short-dated interest rate swaps more appealing from a carry-neutral perspective. However, any movement beyond two weeks may still carry some uncertainty, especially with broader macro data yet to be released.

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