PBOC sets USD/CNY fix at 7.0733, signaling pushback against yuan’s rapid gains
China’s central bank set the yuan’s daily reference rate well above market expectations and injected short-term cash, a clear signal it intends to moderate the currency’s recent appreciation momentum as risk appetite improves.
Fix above expectations underscores managed pace of CNY strength
The People’s Bank of China set the USD/CNY midpoint at 7.0733 for the session, versus a market estimate around 7.0554. The prior onshore close was 7.0640. A higher-than-expected USD/CNY fixing effectively leans against faster yuan gains, aligning with recent official efforts to smooth FX volatility as the yuan edges toward the psychologically important 7-per-dollar handle.
Under China’s managed float, onshore USD/CNY can trade within a ±2% band around the daily midpoint. A firmer fix for the dollar typically curbs immediate CNY appreciation, guiding banks and corporates on pricing and hedging while tempering speculative pressure in the offshore market (CNH).
Liquidity support steady: 7-day reverse repos at 1.40%
The PBOC also injected CNY 180.8 billion via 7-day reverse repos at an unchanged 1.40%, keeping interbank conditions supported without altering policy rates. The operation helps stabilize money-market liquidity into year-end while reinforcing a measured policy stance that balances growth support with financial stability.
FX market take
The fix suggests policymakers are comfortable with a stronger yuan over time but want to avoid a disorderly or rapid move, especially as global risk sentiment improves alongside tentative US–China thaw signals. For traders, the bias implies tighter ranges in onshore trading, potential narrowing of the CNH–CNY spread, and a more controlled appreciation path relative to broader dollar trends. Intra-Asia FX could see reduced spillover from yuan strength if authorities continue to lean against outsized moves.
Key Points
- USD/CNY fix set at 7.0733, above the market estimate of 7.0554, guiding against rapid yuan gains.
- Previous onshore close: 7.0640.
- Trading band remains ±2% around the daily midpoint.
- PBOC injected CNY 180.8bn via 7-day reverse repos at an unchanged 1.40%.
- Signal to FX markets: controlled CNY appreciation amid improving sentiment and ongoing policy support.
What to watch next
- CNH–CNY spread behavior post-fix for signs of offshore-onshore divergence.
- Dollar direction and US yields, key drivers of broader Asia FX performance.
- Fixing bias in coming sessions for clues on PBOC tolerance toward further CNY strength.
FAQ
What did the PBOC do today?
The PBOC set the USD/CNY daily midpoint at 7.0733, above the market estimate, and added CNY 180.8bn in liquidity via 7-day reverse repos at 1.40%.
Why does the daily fix matter for traders?
The fix anchors onshore trading by defining the center of a ±2% band. A stronger USD fix (higher USD/CNY) typically slows yuan appreciation and signals the PBOC’s tolerance for near-term currency moves.
How does this affect offshore CNH?
A higher-than-expected fix can pull CNH higher (weaker yuan) or narrow the CNH–CNY spread as offshore markets align with onshore guidance, reducing volatility.
Did the PBOC change interest rates?
No. The 7-day reverse repo rate stayed at 1.40%, indicating steady short-term policy settings alongside liquidity support.
What does this mean for broader FX markets?
By leaning against rapid yuan gains, the PBOC may temper tailwinds for Asia FX versus the dollar, keeping regional currency moves more data- and yield-driven. Traders will watch US rates and risk sentiment for direction.
What should USD/CNY traders monitor next?
Watch subsequent fixings for policy bias, spot performance against the band, and liquidity conditions. A persistent fix above market models would reinforce the message of gradualism in CNY appreciation.
Reporting by BPayNews.
