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 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:
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.
This article was written by Eamonn Sheridan at investinglive.com.