Insights 
VT 
The People’s Bank of China (PBOC) has kept its Loan Prime Rates (LPRs) unchanged. The one-year LPR remains at 3.00%, and the five-year LPR holds at 3.50%.
Currently, the AUD/USD has increased by 0.09%, trading at 1.1664. The PBOC’s main goals are to ensure price stability, promote economic growth, and push for financial reforms.
Ownership And Influence
Owned by the state of the People’s Republic of China, the PBOC is influenced by the Chinese Communist Party. The CCP Committee Secretary, chosen by the State Council’s Chairman, plays a role in the bank’s management.
The PBOC uses a variety of policy tools, including the Reverse Repo Rate and Medium-term Lending Facility. LPR adjustments affect loan and mortgage rates, savings interest, and the Renminbi’s exchange rates.
China’s banking sector also includes 19 private banks, such as digital lenders WeBank and MYbank. These banks started to operate in 2014, marking a shift in China’s state-dominated financial landscape.
The People’s Bank of China held its key lending rates steady on October 20, 2025, which was a move we largely anticipated. This decision signals a preference for currency stability over providing aggressive new stimulus to the economy. For us, this means the central bank is carefully balancing weak domestic growth against the risk of capital outflows.
Economic Data And Its Implications
This cautious stance is understandable given the context of recent economic data. The yuan has been under pressure, hovering near 7.45 to the US dollar, and a rate cut would have weakened it further. This comes even as third-quarter GDP growth for 2025 came in at a disappointing 4.8%, below the official target, and youth unemployment remains stubbornly high at over 16%.
For traders, this steady policy suggests that implied volatility in yuan-related currency pairs like USD/CNH will likely stay suppressed in the coming weeks. The PBOC is clearly signaling it wants to avoid sharp, destabilizing moves in the exchange rate. This makes strategies that benefit from a range-bound market more attractive than those betting on a major breakout.
We can see the ripple effects in commodity-linked currencies like the Australian dollar, which saw a small uptick on the news. A stable Chinese policy is viewed as a modest positive for Australian exports like iron ore. However, with China’s industrial production figures for September showing only a 3.5% year-over-year increase, we don’t foresee a significant rally in these assets.
Looking back, this is a more measured approach compared to the more frequent rate cuts we saw during the 2023-2024 property market crisis. This suggests officials are now more willing to accept slower growth to ensure overall financial stability. We should not expect a large-scale stimulus package to be announced in the near future.
Therefore, selling front-month call options on USD/CNH seems like a reasonable strategy, capitalizing on the central bank’s desire for a stable currency. It would be wise to monitor upcoming retail sales and new home price data for any signs of a deeper slowdown. For now, the path of least resistance appears to be sideways movement.
