People’s Bank of China is around USD/CNY reference rate 0115 GMT.
The People’s Bank of China (PBOC), the Central Bank of China, is responsible for installing the daily middle point of the daily middle point (also known as Rainminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to ups and downs within a certain range, which is called “band,” around a central reference rate, or called “midpoint”. It is currently +/- 2%.
How the process works:
- Daily Midpoint Settings: Each morning, PBOC set a midpoint for yuan against a basket of currency, mainly US dollars. The central bank takes into account factors such as market supply and demand, economic indicators and ups and downs in the international currency market. The midpoint serves as a reference point for business of that day.
- Trading Band: The PBOC yuan allows the yuan to move within a specified range around the midpoint. The trading band is set to +/- 2%, which means that the yuan can appreciate or depreciate a maximum of 2% from midpoint during single trading day. This limit is subject to change by PBOC based on economic conditions and policy objectives.
- Intervention: If the value of the yuan reaches the range of the trading band or experiences excessive instability, the PBOC can interfere with the Forex market by purchasing or selling Yuan to stabil its value. This helps maintain a controlled and gradual adjustment of the value of the currency.
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