The People's Bank of China (PBOC), China's central bank, is responsible for setting the daily midpoint of the yuan (also known as renminbi or RMB). The PBOC follows a managed floating exchange rate system that allows the value of the yuan to fluctuate within a certain range, called a “band,” around a central reference rate, or “midpoint.” It is currently at +/- 2%.
How the process works:
- Daily Midday Setting: Every morning, the PBOC sets a midpoint for the yuan against a basket of currencies, primarily the US dollar. The central bank takes into account factors such as market supply and demand, economic indicators, and international currency market fluctuations. The midpoint is a reference point for that day's trade.
- The trading band: The PBOC allows the yuan to move within a certain range around the midpoint. The trading band is set at +/- 2%, meaning that the yuan could appreciate or depreciate by a maximum of 2% from the midpoint in a single trading day. This range is subject to change by the PBOC based on economic conditions and policy objectives.
- Intervention: If the value of the yuan is near the end of the trading band or experiences excessive volatility, the PBOC may intervene in the foreign exchange market by buying or selling the yuan to stabilize value. This helps to maintain a controlled and gradual change in the value of money.
The highest value of the CNY share was 7.3322
more to come
The gap between the market price and the reference rate for CNY is wide and widening.
