The People’s Bank of China (PBOC) has changed the USD/CNY reference rate to 7.0573, down from 7.0602. This change signals how trading may unfold today. The PBOC’s main goals are to keep prices and exchange rates stable while also supporting economic growth. It plays an essential role in financial reforms and helps develop China’s financial market.

Influence of the Chinese Communist Party

The PBOC is owned by the People’s Republic of China and is influenced by the Chinese Communist Party. The Secretary of the Party, who is appointed by the Chairman of the State Council, oversees it. Mr. Pan Gongsheng serves as both the governor and Secretary. The PBOC uses several monetary policy tools, including: – The seven-day Reverse Repo Rate – Medium-term Lending Facility – Reserve Requirement Ratio The Loan Prime Rate is the main benchmark interest rate. In China’s mainly state-run financial system, 19 private banks are allowed to operate. The largest ones, WeBank and MYbank, are backed by Tencent and Ant Group, showing how technology is changing banking. In 2014, the government opened up the financial sector to private-capital-backed lenders. Today’s stronger Yuan fixing at 7.0573 shows that authorities prefer a stable currency. This indicates that the PBOC is comfortable with the current Yuan level and may guide it to strengthen slightly. This aligns with their efforts to keep the currency stable.

Impact of US Federal Reserve Policy

This change comes as the US Federal Reserve has adjusted its policies, keeping the Fed funds rate steady at 4.25% after several cuts in 2025. The smaller interest rate gap between the US and China has relieved some of the pressure on the Yuan seen in 2023 and 2024. This gives Chinese leaders more freedom to maintain stability without having to counteract a strong dollar. After spending a year on boosting growth, the focus may now shift toward ensuring financial stability to attract foreign investment. Recent data indicate that China’s exports rose for the third month in a row in November 2025, creating a positive economic backdrop for a steady currency. A stable Yuan is essential to entice foreign portfolio managers who are cautiously returning to Chinese markets. In contrast to the volatility of 2023, when the USD/CNY rate exceeded 7.30, today’s fixing shows that authorities want to avoid repeating that weakness. This suggests that the likelihood of significant Yuan depreciation is lessened for now. For derivative traders, this might mean lower volatility in the weeks ahead. Strategies that benefit from range-bound price movements, such as selling short-dated strangles on the USD/CNH pair, may be advantageous. The consistent and strong fixing reduces the chances of sharp movements in either direction. The general trend appears to lean towards a stable or slightly stronger Yuan as we approach the new year. This reduces the chances of sudden Yuan weakness, making long USD/CNY positions more costly. Traders might look for opportunities that benefit from the Yuan maintaining or slightly appreciating against the dollar. It’s important to note that the PBOC’s actions are influenced by state policy, which can change rapidly. Traders should closely monitor upcoming inflation and trade data, as any significant economic downturn could lead policymakers to change their approach to the currency. The next announcement of China’s Loan Prime Rate will also be a crucial indicator of the central bank’s plans. Create your live VT Markets account and start trading now.

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