PBoC sets midpoint for USD/CNY at 7.1008, down 21 pips

PBoC sets midpoint for USD/CNY at 7.1008, down 21 pips

The People's Bank of China (PBOC) has set the USD/CNY reference rate at 7.1008 for September 2, 2025, marking a decline of 21 pips from the previous midpoint. This adjustment reflects the central bank's ongoing efforts to manage the yuan's exchange rate within a controlled band.

The PBOC follows a managed floating exchange rate system, allowing the yuan to fluctuate within a range of +/- 2% around a central reference rate. The daily midpoint setting is influenced by market supply and demand, economic indicators, and international currency market fluctuations [1].

The latest adjustment is part of the PBOC's strategy to maintain stability in the foreign exchange market. The central bank may intervene if the yuan's value approaches the limit of the trading band or experiences excessive volatility, helping to stabilize its value and maintain a controlled adjustment.

This move comes amidst a series of macroeconomic developments and policy announcements. The PBOC recently announced a significant liquidity injection through a CNY 1 trillion (USD 140.74 billion) outright reverse repo operation, scheduled for September 5, 2025. This operation aims to maintain ample liquidity in the national banking system [1].

Investors should closely monitor these developments and consider strategic adjustments to their portfolios. Currency hedging, sector rotation, and diversification are recommended to mitigate risks associated with currency fluctuations and trade uncertainties.

References:
[1] https://investinglive.com/centralbank/pboc-is-expected-to-set-the-usdcny-reference-rate-at-71225-reuters-estimate-20250909/
[2] https://www.ainvest.com/news/usd-cny-finishes-domestic-session-7-1378-24-pips-previous-close-2509/