The People’s Bank of China (PBOC) has set the USD/CNY central rate at 6.9858 for today. This is slightly higher than yesterday’s rate of 6.9843 and notably above the Reuters estimate of 6.9548. The PBOC’s goals are to keep prices stable, maintain a steady exchange rate, and encourage economic growth. It is a state-owned bank, with the Chinese Communist Party influencing its operations.

Tools of the PBOC

The PBOC uses several monetary tools, including the seven-day Reverse Repo Rate, the Medium-term Lending Facility, and the Reserve Requirement Ratio. The Loan Prime Rate is particularly important because it directly impacts loan, mortgage, and savings interest rates. China has allowed private banks since 2014, and currently, 19 are in operation, representing a small part of the financial sector. The largest private banks, WeBank and MYbank, are supported by major tech firms like Tencent and Ant Group. This shift marked a significant change in China’s financial landscape, which was mainly controlled by state-owned banks. Today, the People’s Bank of China announced a reference rate of 6.9858, which is lower than market expectations. This indicates a clear intention to guide the currency down, especially since experts had estimated around 6.95. We can expect further managed depreciation soon. This direction aligns with recent economic data. China’s Q4 2025 GDP growth was 4.8%, and December exports fell by 1.5%. A weaker Yuan could help boost competitiveness, especially for the manufacturing sector as the global economy slows down.

Implications for Traders

For currency traders, this suggests a strategy to buy USD/CNY and its offshore counterpart, USD/CNH. Consider buying call options on this pair to benefit from potential price increases while managing risk. Implied volatility on these options is expected to rise, reflecting greater uncertainty about how fast the Yuan will decline. We also need to think about the impact on commodities since China is the largest consumer. A weaker renminbi makes dollar-priced imports, like crude oil and iron ore, more expensive, which may reduce demand. This could lead to opportunities for shorting commodity futures or buying put options on specific industrial metals. This situation isn’t new; a similar pattern occurred in parts of 2025. Back then, the central bank allowed the Yuan to weaken gradually past the 7.30 mark to handle external pressures and support growth. Thus, today’s rate setting should be seen as the beginning of another managed cycle. Create your live VT Markets account and start trading now.

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