PBOC sets USD/CNY reference rate at 7.0816 vs. 7.0825 previous

Haresh Menghani FXStreet

On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 7.0816 compared to Friday's fix of 7.0825 and 7.0956 Reuters estimate.

PBOC FAQs

What does the People's Bank of China do?

The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.

Who owns the PBoC?

The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.

What are the main policy tools used by the PBoC?

Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.

Are private banks allowed in China?

Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

GBP/USD dips below 1.3350 with bullish momentum losing steam

The British Pound ticks lower against the US Dollar Monday, attempting to close a seven-day rally, as tensions rise again in the Strait of Hormuz, one of the critical points in the peace process between Washington and Tehran. The GBP/USD pair trades near 1.3340 at the time of writing, down from 1.3387 highs last week, although it maintains a near-term bullish trend intact.

EUR/USD drops toward 1.1400 as US Dollar rebounds

EUR/USD pair trades marginally lower, heading toward 1.1400 in the European session on Monday. The pair faces slight selling pressure as the US Dollar gains ground after a negative weekly close. Middle East concerns and the USD/JPY rally support the Greenback.

Gold sticks to modest losses amid Hormuz risks; lacks bearish conviction

Gold shows some resilience below the $4,150 level, and for now seems to have stalled its intraday retracement slide from a two-week high, levels just above the $4,200 mark, touched earlier this Monday. The commodity, however, retains its negative bias heading into the European session, seems to have snapped a three-day winning streak.

Dogecoin recovery stalls amid early signs of whale support

Dogecoin (DOGE) price nears $0.0770, maintaining a broadly consolidative tone for the last three days after Friday’s 4% rebound. The first-ever meme coin is losing retail interest as DOGE derivatives volume drops, while on-chain data shows early signs that large-wallet investors, commonly referred to as whales, are expanding their holdings.

Week ahead – ISM services PMI and Fed Minutes to shake Fed hike bets

The US dollar is finishing the week on the back foot against most of its major counterparts this week, losing the most ground against the kiwi, the franc and the pound. Despite the pullback, investors remained adamant in their view that the Fed may have to press the rate hike button before the turn of the year.

Kevin Warsh offers no policy clues: Why markets still got their answer

Financial markets came to Sintra looking for clues about the Federal Reserve's (Fed) next move. They largely left with confirmation that Fed Chair Kevin Warsh intends to make those clues much harder to find.