Friday , 22 November 2024
Home Forex PBOC is expected to set the USD/CNY reference rate at 7.1208 – Reuters estimate
Forex

PBOC is expected to set the USD/CNY reference rate at 7.1208 – Reuters estimate

People’s Bank of China USD/CNY reference rate is due around 0115 GMT.

The People’s Bank of China (PBOC), China’s central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a “band,” around a central reference rate, or “midpoint.” It’s currently at +/- 2%.

How the process works:

  • Daily midpoint setting: Each morning, the PBOC sets a midpoint for the yuan against a basket of currencies, primarily the US dollar. The central bank takes into account factors such as market supply and demand, economic indicators, and international currency market fluctuations. The midpoint serves as a reference point for that day’s trading.
  • The trading band: The PBOC allows the yuan to move within a specified range around the midpoint. The trading band is set at +/- 2%, meaning the yuan could appreciate or depreciate by a maximum of 2% from the midpoint during a single trading day. This range is subject to change by the PBOC based on economic conditions and policy objectives.
  • Intervention: If the yuan’s value approaches the limit of the trading band or experiences excessive volatility, the PBOC may intervene in the foreign exchange market by buying or selling the yuan to stabilize its value. This helps maintain a controlled and gradual adjustment of the currency’s value.

This article was written by Eamonn Sheridan at www.forexlive.com.

Leave a comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Articles

Goldman Sachs sees Brent price upside risks in short term, medium-term skewed to downside

Goldman Sachs: Sees upside risks to Brent prices in short term, with...

NZD has a quick drop

The Reserve Bank of New Zealand embarked on its rate cutting cycle...

PBOC says will prevent ‘one sided’ expectations on yuan

People's Bank of China official says:We will prevent the formation of one-sided...

RBA first cut forecasts from Australia’s 4 biggest banks

Westpac revised their first cut forecast to May from February:Westpac revise its...