The People’s Bank of China (PBOC) has set the USD/CNY central rate for the next trading session at 7.1021. This is higher than the previous rate of 7.1007, but lower than the Reuters estimate of 7.1353. The PBOC aims to keep prices stable, including exchange rates, and to promote economic growth. It also works on financial reforms to improve the financial market. The PBOC is state-owned and influenced by the Chinese Communist Party. Mr. Pan Gongsheng is currently both the Committee Secretary and the Chairman of the PBOC.

Monetary Policy Tools Of The PBOC

The PBOC uses various monetary policy tools, including the seven-day Reverse Repo Rate, the Medium-term Lending Facility, foreign exchange interventions, and the Reserve Requirement Ratio. The Loan Prime Rate (LPR) is China’s benchmark interest rate, affecting loans, mortgages, and savings interest rates. Changes to the LPR can also influence the Chinese Renminbi exchange rate. China has 19 private banks that make up a small part of its financial system. The largest, WeBank and MYbank, are backed by tech companies Tencent and Ant Group. Since 2014, private capital has been allowed in the state-dominated banking sector. The PBOC wants to prevent further depreciation of the yuan. Today’s USD/CNY fixing at 7.1021 is much stronger than the expected 7.1353. This shows that the authorities plan to manage the exchange rate actively for stability. This decision responds to economic pressures. Data from the third quarter of 2025 reveals a GDP growth rate of 4.4%, which is below expectations, indicating a slow recovery, especially in the property and consumer markets. Coupled with a weak export market, this situation has led to increased bets against the yuan.

Economic Impact And Strategy

This strategy aligns with the US Federal Reserve’s ongoing high interest rates to tackle persistent inflation, which was 3.2% in September 2025. The large interest rate gap between the US and China supports the dollar and puts pressure on the yuan. Therefore, the PBOC is working against strong global capital flows by managing the currency. Historically, we have seen similar strong fixing patterns. Late in 2023, the PBOC took aggressive actions to stop capital outflows and stabilize the currency. This suggests a strategy focused on preventing sharp declines rather than aiming for a specific exchange rate. For derivative traders, this adds risk to holding simple long USD/CNY positions, as the PBOC can limit increases. Options strategies that take advantage of a stable currency or rising volatility, like selling call spreads or buying straddles, might be more suitable. The recent interventions make it hard to predict the short-term direction. Looking ahead, we should closely monitor the upcoming Medium-term Lending Facility (MLF) rate decision for hints about domestic monetary policy. Any further easing to support the economy could conflict with the PBOC’s goal of a stable yuan. This tension between promoting growth and maintaining currency stability will likely influence trading conditions in the coming weeks. Create your live VT Markets account and start trading now.

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