The People’s Bank of China has set the USD/CNY exchange rate at 7.0773 for the next trading session, a small change from the previous 7.0764. The bank’s main goals are to keep prices stable and boost economic growth while pushing for financial reforms. The People’s Bank of China is state-owned and led by the Committee Secretary of the Chinese Communist Party. Currently, Mr. Pan Gongsheng serves as both the Committee Secretary and the Governor.

Distinct Policy Tools

The central bank employs several unique policy tools unlike those in Western countries. Key tools include the seven-day Reverse Repo Rate, the Medium-term Lending Facility, foreign exchange interventions, and the Reserve Requirement Ratio. The Loan Prime Rate is the key interest rate that affects loans and mortgages. In China, there are 19 private banks, including well-known digital lenders WeBank and MYbank, which are linked to tech companies Tencent and Ant Group. In 2014, China allowed private capital to enter the mostly state-owned financial sector. The slight drop in the Yuan to 7.0773 indicates that the central bank is okay with a slow depreciation versus the dollar. This small adjustment suggests a policy that may help exports, given recent economic data. For derivative traders, it hints that the PBOC is not trying to defend a specific exchange rate aggressively right now. It’s important to note that this adjustment follows last week’s trade data from November 2025, showing export growth slowing to just 1.5%, much lower than expected. Added to this, a Caixin Manufacturing PMI dipped to 49.8, giving strong reasons for policymakers to guide the currency lower. These figures suggest a likelihood of further managed depreciation in the weeks ahead.

Historical Precedent

This situation brings to mind 2023, when fears over the economy and a strong US dollar pushed the USD/CNY rate above 7.30. While we are not at that level now, history indicates that the PBOC will manage any decline gradually instead of making sudden changes. This makes buying options on USD/CNY calls appealing for those wanting to bet on a similar trend while minimizing risk. Given that the central bank aims for stability, we do not anticipate an abrupt devaluation, keeping implied volatility on USD/CNY options relatively low. Currently, implied volatility for 1-month options is around 4.5%, which is low considering the economic pressures. This situation could make selling out-of-the-money USD/CNY puts or using call spreads a smart strategy for collecting premium while maintaining a bullish stance on the USD. Create your live VT Markets account and start trading now.

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