PBOC is expected to set the USD/CNY reference rate at 6.9722 – Reuters estimate

The People's Bank of China (PBOC) is expected to set the USD/CNY reference rate at around 6.9722, a signal closely monitored in Asian foreign exchange markets. China employs a managed floating exchange rate system where the yuan trades within a defined range around a daily central reference rate established by the PBOC. This system allows fluctuations of ±2% from the official rate. The midpoint takes into account the previous day's closing price and various economic factors. Post-announcement, USD/CNY freely trades within this bandwidth, although the central bank may intervene if market pressures push the yuan towards the edges. A stronger CNY midpoint often indicates the PBOC's resistance to depreciation, while a weaker fixing shows tolerance towards a softer yuan in response to dollar strength or economic challenges. During periods of global volatility, the fixing's significance increases, providing insights into China's currency priorities amidst competitive pressures and capital stability objectives.