Insights 
VT 
Chinese markets have reopened following a holiday on Monday.
The People’s Bank of China (PBOC) has the responsibility of setting the daily midpoint for the yuan (renminbi or RMB). This is part of a managed floating exchange rate system permitting the yuan’s value to vary within a specified range, known as a “band,” around a central reference rate or “midpoint,” currently at +/- 2%.
Monetary Moves
The previous closing rate was 7.1961.
On the monetary front, the PBOC injected 454.5 billion yuan through 7-day reverse repos, with an interest rate of 1.40%.
This article opens with key moves from the Chinese central bank, right after their market reopened following a public holiday. When the People’s Bank of China, often called the PBOC, sets its daily yuan midpoint, it is steering how far the currency can move that day. It’s not a free float like some other major currencies, rather it is nudged within a narrow channel—plus or minus 2% from that official rate.
So when the yuan closed previously at 7.1961, traders were waiting to see how the midpoint would be adjusted. The new midpoint sets the tone, indicating whether policymakers are comfortable with recent depreciation or plan to push for more stability.
Alongside this, the central bank placed over 450 billion yuan of liquidity into the banking system using seven-day reverse repos, offering them at a 1.40% rate. That’s not only a sign of short-term cash support—it’s also a cue for how loose or tight the authorities want conditions heading into mid-month.
Market Signals
From our side, a few things become important. First, watching how close the traded rate stays to the midpoint will offer a strong read on PBOC sentiment. If markets constantly push the currency toward the weaker edge of the band, and Beijing doesn’t tighten things, that tells us something very direct. Slight breathing room is tolerated, but staunch defence could come fast if we overshoot.
Secondly, the open injection through short-term repos—particularly such a chunky amount—suggests the focus is more on settling domestic liquidity rather than tackling inflation or overheated lending. Yields are not being coaxed higher. This typically supports short-dated strategies. It also implies authorities are choosing to preserve fluidity in money markets rather than pulling back in a tightening move.
Traders exposed to RMB pairs should stay sharply tuned to midpoints released overnight. These figures do not shift randomly—they reflect high-level policy views, especially when global risk appetite is muddy or Chinese macro data doesn’t inspire much faith. Currencies may slide quietly for some time, but strong deviations from reference levels can draw policy reactions.
We also think it’s worth tapping into high-frequency flows. If repo injection sizes begin shrinking, that may point to reduced caution—or a desire to coax borrowing costs higher. For now, however, the scale and tenor remain heavily weighted toward accommodation. Seven-day maturities suggest the liquidity support isn’t meant to be long-lasting; it is short cover, not strategy shift.
Eyes also need to remain on state bank flows during London and US hours—if these banks turn up buying RMB sharply as we drift over the 7.20 handle, it may align with invisible red lines.
Keep positioning reasonably nimble. When Beijing keeps the levers in play like this—adjusting rates in small fragments, guiding the fix, and providing frequent injections—it indicates policy intent without needing formal statements. The signals are there if one’s watching.
