PBOC sets USD/CNY fix at 7.0750, adds liquidity as China steers a steady start to December
China’s central bank set the yuan’s daily reference rate at 7.0750 against the dollar, slightly weaker than market estimates, while injecting short-term cash—moves that signal a preference for measured currency stability as year-end flows pick up.
Yuan fix comes in above consensus; liquidity support steady
- USD/CNY fixing: 7.0750 versus a consensus estimate near 7.0709
- Previous onshore close: 7.0740
- Trading band: +/- 2% around the daily midpoint
- Open market operation: PBOC injected RMB 107.6bn via 7‑day reverse repos at an unchanged 1.40%
Key Points
- The People’s Bank of China set the USD/CNY midpoint at 7.0750, marginally weaker than forecasts, reinforcing a “managed stability” stance.
- The fix anchors the yuan’s +/-2% trading band for the session, guiding onshore price action and influencing offshore CNH sentiment.
- Beijing added RMB 107.6bn in 7-day liquidity at 1.40%, helping smooth money-market conditions into December.
- Traders read the pairing of a steady OMO rate and a close-to-consensus fix as an attempt to damp FX volatility amid seasonal dollar demand.
- Cross-asset sensitivity remains elevated: Asian FX, especially AUD and KRW, typically track yuan direction during the early Asia session.
What the fix signals for FX markets
The slightly higher-than-expected fix suggests the PBOC remains comfortable with a tight range in USD/CNY, resisting outsized swings while acknowledging persistent dollar demand into year-end. Model-based estimates had implied a somewhat stronger yuan, but the official midpoint—near the prior close—keeps spot anchored and curbs volatility spillovers into regional currencies.
Offshore CNH typically takes its cue from the onshore fixing, especially when liquidity is thin early in Asia. A stable fix often narrows intraday ranges in USD/CNH, while widening deviations can prompt arbitrage and official counter-cyclical responses.
Liquidity, yields and the macro backdrop
By holding the 7-day reverse repo rate at 1.40% and supplying cash, the PBOC supports interbank stability and keeps funding costs predictable—important for FX swap points and hedging. The policy mix aims to balance domestic recovery efforts with currency management as investors weigh:
- China’s growth pulse and credit conditions
- The US–China yield differential and global dollar trends
- Seasonal corporate flows and exporter conversions
For FX desks, the focus stays on the daily fixing bias versus market models, spot’s distance from the band, and any signs of stronger counter-cyclical influence should depreciation pressure re-emerge.
Trading takeaways
- Watch USD/CNY and USD/CNH relative to the midpoint; persistent premiums above the fix can attract policy-sensitive flows.
- Crosses such as AUD/USD and USD/Asia pairs may echo yuan moves, particularly during the morning Shanghai window.
- Stable OMOs into December reduce funding volatility, supporting tighter FX basis and carry strategies in Asia.
FAQ
What is the PBOC’s daily fixing and why does it matter?
The fixing is the central reference rate for USD/CNY that sets the onshore trading band (currently +/-2%). It anchors yuan pricing for the session, influences offshore CNH, and signals the PBOC’s tolerance for currency moves.
How does today’s fix compare with expectations?
The midpoint at 7.0750 was slightly weaker than market estimates near 7.0709, suggesting the PBOC prefers a steady, range-bound yuan rather than a faster strengthening.
What does the liquidity injection indicate?
Injecting RMB 107.6bn via 7-day reverse repos at 1.40% helps maintain calm money markets and predictable funding, which supports smoother FX hedging and reduces volatility spillovers.
Will this affect offshore USD/CNH?
Yes. Offshore CNH often tracks the onshore fix, especially when liquidity is light. A steady fix tends to compress intraday ranges, while large gaps can trigger wider swings and arbitrage flows.
What should traders watch next?
Monitor the daily fixing versus model estimates, spot’s proximity to the band, China’s high-frequency activity data, and major US releases that can shift the dollar and global yields.
Reporting by BPayNews.
