Insights 
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The People’s Bank of China (PBOC) set the USD/CNY central rate at 7.0881 on Monday, down from 7.0928 on Friday, and below the Reuters estimate of 7.1146. The PBOC’s primary goal is to maintain price stability, including the exchange rate, and to support economic growth.
The People’s Bank Of China’s Structure
The PBOC is state-owned and influenced by the Chinese Communist Party’s leadership, with Mr. Pan Gongsheng serving as both secretary and governor. Its monetary policy tools include the seven-day Reverse Repo Rate, Medium-term Lending Facility, foreign exchange interventions, and the Reserve Requirement Ratio.
The Loan Prime Rate, China’s benchmark interest rate, affects loan and mortgage rates, along with Renminbi exchange rates. China permits private banks; there are 19, including Webank and MYbank, supported by Tencent and Ant Group. These private banks, introduced in 2014, represent a small part of a state-dominated financial system.
Today’s stronger-than-expected USD/CNY fixing from the People’s Bank of China is a clear signal that they intend to support the yuan. The rate of 7.0881 actively pushes back against market pressure that has been building over the past few months. We should see this as a deliberate move to discourage one-sided bets against the currency.
This action comes after a period of economic uncertainty, with Q3 growth figures for 2025 coming in slightly below expectations and continued softness in the property sector. Looking back, this situation mirrors the challenges we saw throughout 2023 and 2024, where concerns over domestic demand weighed on the currency. The PBOC is showing it will intervene to prevent disorderly depreciation stemming from that sentiment.
Impact On USD CNY Volatility
From our perspective, this policy move is also likely timed to coincide with a softening outlook for the US dollar. With US core inflation having cooled to an average of 2.8% over the past year, markets are increasingly pricing in the possibility of Federal Reserve rate cuts in the first half of 2026. The PBOC is likely positioning the yuan to benefit from this expected dollar weakness.
For derivative traders, this suggests that the implied volatility for USD/CNY should fall in the coming weeks. Selling options that profit from a large upward move in the USD/CNY pair, such as out-of-the-money calls, could be a viable strategy. The PBOC has effectively signaled a cap on the exchange rate for now.
We have seen this playbook before, particularly during the challenging period in late 2023 when the PBOC used consistently strong fixings to defend the 7.35 level. Official data from that time showed state banks were also active sellers of dollars, reinforcing the central bank’s guidance. Today’s fix suggests that same determination is now being applied near the 7.10 level.
The central bank is also carefully balancing its objectives of promoting growth while ensuring financial stability. While they have used tools like Reserve Requirement Ratio cuts this year to encourage lending, today’s currency fixing proves they will not allow stimulus measures to result in a destabilizing capital outflow. This dual approach indicates a preference for a steady, controlled currency rather than a weak one.
