The People’s Bank of China (PBOC) set the USD/CNY central rate at 7.1441. This is lower than the estimated rate of 7.1742, showing how PBOC manages the currency in a floating exchange rate system. The last closing rate was 7.1774. In this system, the yuan can change within a range of +/- 2% around the central rate.

Recent Financial Moves

The PBOC injected 309 billion yuan into the market through 7-day reverse repos at an interest rate of 1.40%. Out of this amount, 150.5 billion yuan will mature today, resulting in a net injection of 158.5 billion yuan. This yuan fixing sends a strong message from officials. The rate was set much stronger than expected, indicating a desire to prevent the currency from weakening further. This represents the largest difference between the official rate and market predictions in over a year. This action likely reflects that China’s Q2 2025 GDP growth surpassed expectations at 4.9%. This gives authorities confidence to strengthen the currency. The move aims to boost investor confidence and counter the ongoing capital outflows seen in the first half of 2025. It also strengthens Beijing’s position ahead of new trade talks with Washington next month. In the coming weeks, we should consider buying put options on the USD/CNY pair to bet on further yuan strength. With this surprising decision, implied volatility has likely risen, making it interesting to sell high-strike call options on USD/CNY for potential profit. The 7.20 level now looks like a strong ceiling for the dollar against the yuan.

Strategic Financial Decisions

We’ve seen this strategy before, especially in 2019 and 2023, when the central bank acted to defend the currency against rapid declines. Historical patterns suggest these strong fixes are just the beginning of a policy effort that could last for several weeks. Therefore, we should not expect significant yuan weakness in the near future. A stronger yuan usually increases China’s buying power for commodities, which could support industrial metal prices. Copper, which was around $8,400 per tonne in July 2025, may find solid support here. We should also expect stronger currencies from key trading partners, like the Australian dollar. The large cash injection into the banking system is key to this strategy. It shows that while officials want a stronger currency, they aim to maintain domestic credit and not slow the economy. This dual approach tells us to focus on currency intervention rather than anticipating a broad tightening of financial policy. Create your live VT Markets account and start trading now.

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