Insights 
VT 
On Wednesday, the People’s Bank of China (PBOC) set the USD/CNY central rate at 7.0843, compared to the previous day’s rate of 7.0856 and a Reuters estimate of 7.0962.
The primary objectives of the People’s Bank of China are to maintain price and exchange rate stability and to promote economic growth. It is also involved in implementing financial reforms, such as developing the financial market.
PBOC’s Role and Leadership
The PBOC is state-owned by the People’s Republic of China and is under the influence of the Chinese Communist Party Committee Secretary. The current positions of CCP Committee Secretary and Governor are held by Mr. Pan Gongsheng.
The PBOC utilises a broad set of policy tools including Reverse Repo Rate, Medium-term Lending Facility, foreign exchange interventions, and Reserve Requirement Ratio. The Loan Prime Rate, China’s benchmark interest rate, influences loan and mortgage rates as well as interest on savings, affecting exchange rates of the Renminbi.
China has 19 private banks, including digital lenders WeBank and MYbank, backed by Tencent and Ant Group, respectively. This marks a shift since 2014 when domestic lenders fully capitalised by private funds were allowed in the financial sector.
The People’s Bank of China has set the yuan stronger than both the previous day and market expectations, signaling a clear intention to support the currency. This action suggests a desire for stability and a pushback against depreciation pressures. For us, this means the likelihood of the USD/CNY exchange rate breaking significantly higher in the coming weeks has been reduced.
Recent Economic Data and Impact
This policy move is particularly important when we consider the recent economic data from the third quarter of 2025, which showed China’s export growth slowing to just 1.5% year-over-year. Typically, weak trade figures would put downward pressure on the currency. The central bank’s strong fix is therefore a direct countermeasure to these fundamental economic headwinds.
We see this as a familiar strategy, reminiscent of the playbook used back in 2023 when the PBOC consistently intervened to manage the yuan’s value against a strong US dollar. With the Federal Reserve having maintained elevated interest rates through most of 2025, capital outflow pressures have been a persistent theme. The PBOC is once again demonstrating its low tolerance for rapid currency depreciation.
For options traders, this strong guidance should dampen near-term implied volatility in the USD/CNY pair. One-month implied volatility has already ticked down to 4.1% from 4.5% last week, and we might consider selling strangles if we believe the central bank will enforce a tight trading range. This strategy profits if the exchange rate remains stable, which the PBOC is actively encouraging.
Given this, we should be cautious about positioning for significant yuan weakness. Selling out-of-the-money call options on the USD/CNY could be a viable strategy to capitalize on the perceived ceiling being established by authorities. The shift in market sentiment is already visible, as one-month risk reversals, which measure the skew between call and put options, have fallen to their lowest level since August 2025.
