The People's Bank of China (PBOC), China's central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a "band," around a central reference rate, or "midpoint." It's currently at +/- 2%.

Earlier:

The daily fixing of this mid-rate is often interpreted as a policy signal rather than just a technical reference point. A higher-than-expected USD/CNY midpoint is typically read as a sign the PBOC is leaning against CNY appreciation pressure, like today.

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In other news from the People's Bank of China, China's Loan Prime Rates remain unchanged again, marking the seventh consecutive month without a change.

PBoC sets 5 year at 3.50% (vs. exp. 3.50% and prior 3.5%)

  • 1 year at 3.00% (vs.exp. 3.0% and prior 3.0%)

A look at the past changes in the LPR, since early 2022:

DateOne-year LPRFive-year LPRChangeNotes
May 20253.00%3.50%-10bpLatest cut; both 1Y and 5Y trimmed.
Feb 20243.45%3.95%-25bp (5Y only)Big mortgage-linked cut aimed at property sector support.
Aug 20233.45%4.20%-10bp (1Y), -15bp (5Y)Coordinated easing to counter weak growth.
Jun 20233.55%4.20%-10bp (1Y), -10bp (5Y)First LPR cut since Aug 2022.
Aug 20223.65%4.30%-5bp (1Y), -15bp (5Y)Targeted mortgage support.
Jan 20223.70%4.60%-10bp (1Y), -5bp (5Y)Part of early 2022 easing cycle.

China's main policy rate is now the reverse repo rate, currently at 1.4% for the 7-day.

The 7-day rate serves as a key policy benchmark, influencing other lending rates like the Loan Prime Rates (LPRs). The PBOC uses these open market operations to inject or absorb funds, influencing interbank lending rates.

Source: Investing Live