The People’s Bank of China (PBOC) has set the USD/CNY central rate at 7.0928 for the next trading session, down from the previous rate of 7.1235. The expected rate from Reuters was 7.1192. The PBOC’s goals include keeping prices and exchange rates stable while promoting economic growth. It’s a state-owned bank influenced by the Chinese Communist Party, with Pan Gongsheng serving as both committee secretary and governor.

Monetary Tools and Strategies

The PBOC uses several monetary tools that differ from those of Western banks. These tools include the Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions, and the Reserve Requirement Ratio (RRR). The Loan Prime Rate (LPR), which is China’s benchmark interest rate, affects loan and savings rates as well as the Renminbi exchange rate. China allows 19 private banks in its financial system. Leading digital lenders like WeBank and MYbank are backed by Tencent and Ant Group. In 2014, China fully opened its government-controlled financial sector to domestic lenders backed by private funds. The People’s Bank of China is clearly signaling support for the yuan by setting the USD/CNY rate at 7.0928. This action counters recent market pressures and aims to strengthen the currency. This decision comes after recent data showed China’s Q3 2025 GDP growth slowing to 4.9%, which increased speculation against the yuan. The unexpected rate increase may surprise traders betting on a weaker yuan. We should expect more currency volatility in the weeks ahead. One-month implied volatility on USD/CNH options has risen from 4.5% last week to over 6.2% in early trading, indicating that larger price swings are now anticipated in the options market.

Trading Strategies

Traders should consider abandoning bets against the yuan and may want to explore options that benefit from rising volatility. For those who believe the PBOC will maintain this rate, buying CNH call options or selling USD/CNY futures could be appealing strategies. In previous interventions in 2023, the central bank typically made additional policy moves to strengthen its position. This change also affects other assets linked to China’s economy. A stronger, more stable currency usually supports domestic stocks by easing fears about capital outflows. We have already seen futures on the FTSE China A50 index rise over 1.2% this morning. Create your live VT Markets account and start trading now.

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