PBOC Sets Yuan Fixing at 6.7162 per Dollar, Strongest Since February 2023
Key Facts
On October 26, the People’s Bank of China set the dollar’s reference rate at 6.7162 yuan, the strongest fixing since February 2, 2023. But the rate was weaker than the market estimate of 6.6691 yuan per dollar, as a rise in the dollar/yuan pair means a weaker yuan. This highlights the contrast between the strength of the fixing relative to its previous levels and the stronger currency level the market had expected. The bank announced two separate reverse repo operations on the same day, without the source specifying their net effect on liquidity. The decision comes as benchmark lending rates remain unchanged for the seventeenth consecutive month.
The yuan’s permitted trading band limits daily moves to ±2% around the reference rate. The source did not link the two liquidity operations to managing currency volatility or specify a direct objective for them. These details help frame the currency decision alongside the bank’s domestic tools without assuming an effect it did not announce.
This comes as Governor Pan Gongsheng said the overnight interbank repo rate has effectively become the monetary policy target rate. Reuters quoted him as saying, "The overnight interbank repo rate has effectively become the People’s Bank of China’s monetary policy target rate." The governor said the proposed shift in the policy framework does not mean an interest rate cut. In a statement issued after its annual conference, the bank said it would continue a moderately accommodative monetary policy in 2026 and seek to keep the renminbi stable at a reasonable and balanced level and avoid overshooting.
On economic activity, the official manufacturing PMI stood at 50.1% in September, up 0.3 percentage points from the previous month and back in expansion territory. The production index reached 51.7%, an increase of 1.3 percentage points, while the new orders index registered 50.5%, down 0.1 percentage points. The National Bureau of Statistics of China said, "China’s manufacturing PMI stood at 50.1% in September, up 0.3 percentage points." The components point to improved production alongside a slight decline in new orders. Official data cited by Reuters also showed the economy grew 4.5% year on year in the third quarter, exceeding expectations and within the annual growth target of 4.5% to 5%.
Markets are awaiting the release of the October manufacturing PMI on October 31, with a reading of 50.1 expected, according to the Investing.com calendar. The next reading will provide another indication of manufacturing activity after the official index returned to expansion territory in September. The dollar closed against the offshore yuan at 6.66837 on October 25, compared with a close of 6.67206 on October 22. These closes show a decline in the dollar’s yuan price between the two dates, alongside the bank’s reference rate of 6.7162 on October 26. According to its announcement, the bank continues to target renminbi stability at a reasonable and balanced level through 2026.