The People’s Bank of China (PBoC) set the USD/CNY central rate at 7.0885 for Tuesday, a slight rise from the previous rate of 7.0867. This rate is also lower than the Reuters estimate of 7.1226. The PBoC’s goal is to keep prices and exchange rates stable while supporting economic growth and financial market development in China. The PBoC is a state-owned bank of the People’s Republic of China. Its direction comes from the Chinese Communist Party Committee Secretary, rather than the governor. Key tools the PBoC uses are the seven-day Reverse Repo Rate, the Medium-term Lending Facility, foreign exchange interventions, and the Reserve Requirement Ratio.

Loan Prime Rate Influence

China uses the Loan Prime Rate as its main interest rate. This rate impacts loans, mortgages, and savings interest. Changes to this rate also influence the exchange rates of the Chinese Renminbi. There are currently 19 private banks in China, although they play a minor role in the financial system. Notable ones include WeBank and MYbank, backed by tech giants Tencent and Ant Group. Since 2014, private funds have been allowed to fully capitalize domestic lenders in the state’s financial sector. The PBoC’s decision to set the yuan’s reference rate much stronger than expected sends a clear message. It appears to be an official effort to prevent the currency from dropping rapidly, despite economic challenges. This shows that current policy objectives are more important than market movements. This strong reference rate comes as recent data for October 2025 reveals exports dropped 3.5% compared to last year. This raises concerns about sluggish global demand, echoing worries from 2023. The weak economic data led the market to expect a weaker yuan, but the PBoC is pushing back against this trend to maintain stability.

Opportunities for Traders

For derivative traders, this situation means spot price changes may be limited in the near term. It may be wise to sell short-term options volatility on USD/CNH, as the central bank will likely keep the currency within a controlled range. A similar trend of intervention was seen in late 2024 when the bank defended the currency against speculative attacks. However, the overall economic situation, including Q3 2025 GDP growth at 4.8%—just below the target—suggests ongoing weaknesses. This implies that while the spot price may be stable, longer-term forwards might provide opportunities for positioning ahead of a managed depreciation. The central bank can’t oppose market realities indefinitely if the economic data remains poor. We also need to keep an eye on any changes to key policy rates, such as the Loan Prime Rate (LPR). Given the weak export and growth data, there is mounting pressure for a rate cut to boost the economy. Any such adjustment would likely increase the downward pressure on the yuan, making the bank’s task of maintaining stability even harder. Create your live VT Markets account and start trading now.

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