PBoC Sets 7.1886 As The New Reference Rate For USD/CNY
The People's Bank of China (PBoC) has issued a new rate for the USD/CNY, which is 7.1886. Earlier, the fix set by the PBoC was 7.1988, which tells us that the Chinese central bank has revised the currency rate lower.
This move by the PBoC has strengthened the Yuan, which will help the domestic economy. And when we consider the recent steps taken by the bank to prop the economy, the currency fix appears to be a part of that wider initiative.
The market was expecting the PBoC to set the USD/CNY fix rate near 7.2791, which is a step up from the earlier rate. However, it appears that the central bank has revised its rate lower rather than increasing it to a higher value.
If we look at the USD/CNY market value, it closed the last day near the 7.2790 level, which is still a little higher than the rate set by the central bank.
16 Billion CNY Injected Through RRs
Besides fixing the rate of the USD/CNY, the central bank also shed some light on its OMO plans. As per the details, the Chinese Central Bank (PBoC) has injected close to 61 billion CNY through its 7-day RRs. The rate for these RRs was around 1.80%, while the earlier value was 1.80% as well.
One crucial detail to note is the 168 billion Yuan worth of RRS are due to mature today. So, in a sense, we can say that the OMO will experience 107 billion Yuan worth of drain today.
In mainland China, the Yuan rate is strictly controlled by the central bank, and it has nothing to do with the actual market value of the Yuan. To make things easier, there are two currencies that are issued by the PBoC: The CNY (Onshore Yuan) and the offshore Yuan, known as the CNH.
The rate of the offshore Yuan is not strictly controlled by the bank but the CNY is indeed controlled by the bank.