PBOC is expected to set the USD/CNY reference rate at 7.0444 – Reuters estimate

The People's Bank of China (PBOC) is set to establish the USD/CNY reference rate at around 0115 GMT, a crucial indicator closely watched in Asian forex markets. The yuan trades within a 2% band around this midpoint, which is determined by various factors including previous closing prices, major currency movements, and domestic economic considerations. If market pressures push the yuan toward the edges of this band, the PBOC may intervene by buying or selling yuan or adjusting liquidity conditions. A stronger-than-expected CNY midpoint suggests that the PBOC is trying to curb depreciation pressure, while a weaker reference could indicate a tolerance for a softer currency responding to dollar strength or economic headwinds. Hence, this fixing serves as more than just a technical reference point; it is a policy signal. In times of global volatility, such as shifts in US rate expectations or trade tensions, the fixing becomes all the more significant for investors seeking insights into Beijing’s currency priorities.