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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%.The previous close was 6.9940.People’s Bank of China injects 528.8bn yuan via 7-day reverse repos in open market operations, rate remains 1.4%.—Earlier:PBOC is expected to set the USD/CNY reference rate at 6.9945 – Reuters estimateThe 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. In recent months, the People’s Bank of China has taken deliberate steps to moderate the speed of appreciation in the onshore yuan, signalling a preference for stability over sharp currency gains. Rather than targeting a specific level, policymakers appear focused on preventing an overly rapid rise in CNY that could disrupt trade, capital flows and domestic financial conditions. Yesterday USD/CNY fell below 7.0 for the first time since May 2023. The PBoC is slowing the appreciation of the yuan, but hasn’t stopped it. —Piecemeal stimulus steps continue from China:China eases property taxes but avoids bold housing stimulus (property downturn drags on)China is extending a value-added tax (VAT) exemption on certain residential property sales, adding another incremental policy measure aimed at stabilising its long-running real estate downturn. While the move lowers transaction costs for homeowners, it underscores Beijing’s preference for targeted relief rather than more forceful intervention.China boosts consumer trade-in subsidies, expands scheme to digital products in 2026China is stepping up efforts to revive household spending, allocating fresh funding from ultra-long special treasury bonds to expand its consumer trade-in subsidy scheme. The programme, first launched in 2024, will be broadened in 2026 to include digital and smart products, as policymakers look to counter weak growth momentum and rebalance the economy toward consumption.—Still to come (very soon!)Economic and event calendar in Asia Wednesday, December 31, 2025 – China PMIs for December
This article was written by Eamonn Sheridan at investinglive.com.
💡 DMK Insight
The PBOC’s management of the yuan’s midpoint is crucial for traders navigating the forex market right now. With the yuan’s value fluctuating within a set band, any significant adjustments by the PBOC can create volatility not just in the yuan but also in correlated currencies like the USD and JPY. Traders should be particularly alert to any announcements or policy shifts from the PBOC, as these could signal changes in China’s economic stance or influence global trade dynamics. If the yuan weakens significantly, it could lead to a ripple effect, impacting commodities priced in dollars and potentially altering the risk appetite among investors. Keep an eye on the daily midpoint adjustments and any related economic indicators from China, as they could provide actionable insights for short-term trading strategies, especially for those focused on forex pairs involving the yuan. Also, consider the broader implications for emerging market currencies, which often react to shifts in the yuan. If you’re trading in this space, monitor the 7.0 level against the USD as a psychological barrier that could trigger more aggressive moves in either direction.
📮 Takeaway
Watch for PBOC announcements and the yuan’s midpoint adjustments, especially around the 7.0 level against the USD, to gauge potential market volatility.
