The People’s Bank of China (PBoC) set the USD/CNY central rate at 7.0864 for Thursday’s trading session. This compares to a previous fix of 7.0843 and a Reuters estimate of 7.1056.

The PBoC’s primary goals are to maintain price and exchange rate stability and promote economic growth. It also focuses on implementing financial reforms, such as opening and developing financial markets.

Structure and Ownership of the PBoC

The PBoC is owned by the People’s Republic of China and is not autonomous. The Chinese Communist Party Committee Secretary, influenced by the State Council Chairman, plays a significant role in its management.

The PBoC utilises varied monetary policy tools, including the seven-day Reverse Repo Rate, Medium-term Lending Facility, and Reserve Requirement Ratio. The Loan Prime Rate is the benchmark interest rate, affecting loan rates, mortgage rates, savings interest, and exchange rates.

China permits 19 private banks, making up a small part of the financial system. The largest include digital lenders WeBank and MYbank. In 2014, China enabled domestic lenders fully capitalised by private funds to operate within its state-dominated financial sector.

The central bank’s decision to set the yuan’s trading midpoint stronger than market expectations is a clear signal. This action on October 30, 2025, shows an official discomfort with the currency’s recent pace of decline against the dollar. We should interpret this as a warning against aggressively betting on further yuan weakness in the immediate term.

China’s Economic Prospects Amidst Currency Management

This move comes as we’ve seen China’s economic data soften, with Q3 GDP growth reported at 4.2% and the latest manufacturing PMI for October slipping to 49.8, just below the 50-point mark indicating contraction. This puts the central bank in a tough position, needing to support the economy without triggering capital flight from a rapidly falling currency. The stronger-than-expected fixing is their tool to manage this balancing act.

Meanwhile, the US dollar remains strong, as the Federal Reserve has signaled it will hold interest rates steady through the end of the year to combat persistent inflation. This wide interest rate difference between the US and China continues to put natural upward pressure on the USD/CNY pair. We are seeing sustained demand for dollars, which the Chinese central bank is actively leaning against.

We remember a similar pattern throughout 2023 and 2024, when authorities consistently used the daily fix to slow the yuan’s depreciation during periods of economic stress. This historical playbook suggests the current intervention is not a one-off event but part of a strategy to ensure stability. Traders should expect this pattern of managed depreciation to continue through the rest of the quarter.

Given this context, derivative traders should consider strategies that profit from low volatility and a capped upside for the USD/CNY pair. Selling out-of-the-money call options on the US dollar against the yuan could be an effective approach. This allows traders to collect premium based on the view that the central bank will prevent the exchange rate from breaking significantly above key psychological levels like 7.15 or 7.20 in the coming weeks.

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