PBOC to Set USD/CNY Reference Rate Amid Concerns Over Yuan's Pace
The People's Bank of China (PBOC) is set to announce its daily USD/CNY reference rate at 6.6951, according to a Reuters estimate.
This move comes amidst concerns from Beijing about the pace of the yuan's appreciation. In late August, the PBOC set its fixing at the widest weak side deviation from market estimates in six months, indicating that the central bank is applying the brakes on the currency's rise rather than reversing the trend.
The PBOC operates a managed floating exchange rate system, which allows the yuan to trade within a band of plus or minus 2% around the daily midpoint. The midpoint reflects a mix of inputs, including the previous day's closing price, movements in major currencies, and domestic considerations like capital flows and growth momentum.
A stronger than expected midpoint typically suggests that the PBOC is leaning against depreciation, while a weaker fixing can signal tolerance for a softer currency. The underlying tension is that continued yuan strength risks hurting export competitiveness at a time when China's broader economy is showing renewed signs of weakness.