Insights 
VT 
The People’s Bank of China has set the yuan midpoint rate at 7.1855 against the US dollar. This is slightly stronger compared to the previous close of 7.1947.
The currency has shown a tendency to decrease recently, but significant fluctuations have been avoided. Chinese and US officials are scheduled to meet on Monday in London, which may influence future economic discussions and decisions.
Midpoint Rate as a Reference
The midpoint rate announced by the People’s Bank serves as a reference point used to guide daily trading of the yuan. A stronger-than-expected fix, such as the latest one at 7.1855 versus the prior close of 7.1947, typically signals an attempt from policymakers to stabilise the currency without drawing attention through more abrupt intervention. In recent sessions, the yuan has softened gradually, although the central bank appears to be using this midpoint to discourage rapid depreciation.
This pattern continues to indicate that there are efforts to guide market expectations rather than allowing a fully free-floating exchange rate. Pressure on the yuan has been mounting due to a variety of external and internal forces. The differential in interest rates between China and the US remains firmly skewed, making it less attractive to hold yuan-denominated assets from a yield perspective. On top of that, weaker-than-expected economic data out of China in recent quarters has dampened international confidence.
The upcoming meeting in London between both sides represents more than just a diplomatic gesture—it’s positioned near enough to recent financial developments to potentially influence mid-term monetary strategies. Not anticipating sweeping policy shifts perhaps, but discussions are likely to touch on foreign exchange stability, trade considerations, and directional guides for capital flows. That leaves the accompanying metrics—currency fixings, onshore rates, and headline commentary—as possible sneak previews of upcoming orientations.
Central Bank Guidance
For our part, what matters now is staying close to what the central bank is offering in terms of guidance, directly and indirectly. Stronger fixings serve not only as a cue for permitted trading bands, but also suggest a ceiling level of tolerance for yuan weakness. If price action continues to hover near the upper end of the permitted range on a daily basis, that creates room for tactical movement—but also implies the importance of aligning with these signals rather than fading them.
Derivative markets, especially options and forwards, are already adjusting implied volatilities based on the recent tempo of fixings. This isn’t the time to overestimate impulses from short-term spot moves. Instead, we observe which tenor buckets are drawing interest and where hedging flows seem bunched. The more aggressively the fix holds steady or leans firm, even against macro headwinds, the more it saps volatility at the tails. We have to adjust accordingly. Slowing down changes in notional exposure and focusing more on the curvature of pricing models could be more rewarding than simply watching spot ticks.
By interpreting the midpoint not just as a mechanical quote but as a policy signal, we remain steps ahead of passive market readers. In these situations, consistency in messaging—even without official declarations—becomes the dominant variable in managing expectation-driven strategies.
