The People’s Bank of China (PBoC) set the USD/CNY central rate at 7.0867 for the upcoming trading session. This is in contrast to the previous Friday’s rate of 7.0880 and a Reuters prediction of 7.1171.

The PBoC aims to maintain price stability and economic growth, along with advancing financial market reforms. Owned by the People’s Republic of China, the central bank is significantly influenced by the Chinese Communist Party, with Mr. Pan Gongsheng holding key roles.

Monetary Policy Tools

The PBoC utilises several monetary policy tools, such as the Reverse Repo Rate, Medium-term Lending Facility, and Reserve Requirement Ratio. The Loan Prime Rate is the benchmark interest rate that alters loan and mortgage rates, impacting the Chinese Renminbi’s exchange rates.

Despite the state dominance, China permits 19 private banks, including digital lenders WeBank and MYbank. These are backed by tech companies Tencent and Ant Group, following regulations allowing private fund-supported domestic lenders since 2014.

Given the People’s Bank of China’s stronger-than-expected USD/CNY fixing today, November 3, 2025, we should see this as a clear signal of their intent to support the renminbi. This action goes against market estimates and suggests a low tolerance for further currency weakness in the near term. For traders, this means short-term bets on a rapidly depreciating yuan carry significant policy risk.

This firm stance comes after China’s latest manufacturing PMI, released last week, dipped to 49.8, indicating a slight contraction and fueling market concerns over economic momentum. The PBOC’s strong fix is a direct counter-signal to this data, showing they will use their currency management tools to ensure stability. We should anticipate that the central bank will continue to lean against market pressure, especially if upcoming trade data disappoints.

Impact on Derivative Trading

For derivative traders, this creates a classic clash between weak economic fundamentals and strong policy intervention, which often increases implied volatility. We believe strategies that profit from a range-bound currency or a sudden spike in volatility, such as short-term option straddles on the USD/CNH pair, are now more attractive. The central bank is effectively putting a floor under the yuan for now, but underlying economic pressures remain.

Looking back at similar periods in 2023 and 2024, we saw the PBOC follow strong currency fixings with other policy actions, like adjusting the Reserve Requirement Ratio (RRR) for banks. Therefore, we must remain vigilant for surprise announcements regarding their other policy tools, such as the Medium-term Lending Facility. These actions are designed to manage domestic liquidity without necessarily weakening the currency.

The interest rate differential between the US and China will continue to be a dominant factor, with the Federal Reserve holding rates steady through the end of 2025. This fundamental pressure favors a stronger dollar over the long run, making long USD/CNY positions a popular carry trade. However, today’s move by the PBOC warns us that this trade is crowded and vulnerable to sharp, policy-driven corrections in the coming weeks.

Create your live VT Markets account and start trading now.