Categories: Business & Economy

People’s Bank of China expected to set USD/CNY benchmark rate at 7.1484 – Reuters estimate

The People’s Bank of China’s USD/CNY benchmark rate is expected around 01:15 GMT.

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

How the process works:

  • Daily midpoint setting: Every morning, the PBOC sets a midpoint for the yuan against a basket of currencies, primarily the U.S. dollar. The central bank takes into account factors such as market supply and demand, economic indicators and fluctuations in the international money market. The midpoint serves as a reference point for the day’s trading.
  • The trading band: The PBOC allows the yuan to move within a specified range around the midpoint. The trading band is set at +/- 2%, meaning the yuan could appreciate or depreciate by a maximum of 2% from the midpoint in a single trading day. This range is subject to change by the PBOC depending on economic conditions and policy objectives.
  • Intervention: If the value of the yuan approaches the trading margin limit or experiences excessive volatility, the PBOC may intervene in the foreign exchange market by buying or selling the yuan to stabilize its value. This helps maintain a controlled and gradual adjustment in the value of the currency.

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Michael Johnson

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