Reuters projection puts PBOC's USD/CNY reference rate at 6.6981

Right now, the way the fix is calculated carries unusual weight because the signals it sends have changed over the past month. For close to a year, the PBOC has published a daily guide that came in softer than market projections, a pattern traders took as a deliberate brake on yuan appreciation. The divergence hit its largest point since February in late August, not long after the currency reached a three-and-a-half-year high. During September, though, the midpoint has risen at a quicker clip, closing some of the distance from market forecasts and hinting that the central bank's resistance to yuan gains has softened. The fixing continues to print below where models suggest, so the stance looks more like easing off the brake than taking it off completely. The calculation facing Beijing has not changed: a stronger currency helps keep capital steady and lowers import bills, while an overly fast climb could undermine export competitiveness at a time when the domestic economy is still weak. The distance between the daily fixing and consensus projections remains one of the strongest indicators of how much further the PBOC is ready to allow the yuan to appreciate.

Earlier:

• Goldman Sachs argues the yuan is undervalued by up to 25%, with markets underestimating its potential rise

The daily midpoint is the least noisy but most direct instrument Beijing has for signalling the desired pace of yuan movement, and after a long stretch of slow-down messages, the latest signal has been a gradual go.

Summary:

• Around 0115 GMT, the PBOC announces the daily USD/CNY reference rate, also called the midpoint, and it counts among the most scrutinised figures in Asian FX trading.
• Under a managed floating exchange rate system, China lets the yuan trade within plus or minus 2% of the daily midpoint during onshore hours.
• The midpoint draws on several inputs: the prior day's close, swings in major currencies such as the US dollar, broader international FX conditions, and domestic factors like capital flows and growth momentum, with officials keeping control of the final level.
• If the yuan is driven toward either edge of the band, the PBOC can intervene by buying or selling the currency directly, altering liquidity, or issuing guidance through state-owned banks.
• A midpoint that beats forecasts usually points to PBOC resistance to depreciation; one that comes in softer can reflect acceptance of a weaker yuan or unease with how quickly it is climbing.
• The fixing has been below market projections for close to a year, and late August saw the gap at its largest since February.
• In September, the PBOC strengthened the fixing for eight straight sessions, the longest run since 2023, and the midpoint subsequently hit its strongest level since February 2023.
• The yuan has reached its strongest levels since early 2023 onshore and since mid-2022 offshore, with Goldman Sachs expecting Beijing to stay comfortable with sustained but gradual appreciation.

The People's Bank of China publishes its daily USD/CNY reference rate at around 0115 GMT, and that fixing remains among the most closely followed readings in Asian FX. Its importance has grown in recent weeks because officials have shifted from restraining the yuan's rise to guiding it higher.

China runs a managed floating exchange-rate regime, so the yuan may move in a corridor of plus or minus 2% around the central midpoint fixed every business day. The midpoint combines the prior close, changes in currencies including the US dollar, overall international FX trends, and domestic factors such as fund flows, growth momentum and financial-stability goals. As the formula is not wholly automatic, officials have room to steer expectations through the fixing.

After the midpoint is announced, onshore USD/CNY is free to trade within that permitted band. Should the currency approach the upper or lower limit, the central bank can smooth things out by buying or selling yuan outright, changing liquidity conditions, or using state-owned banks to pass along guidance. That is why the fixing tends to be viewed as a policy message rather than a purely technical reference point. A midpoint above market forecasts usually signals PBOC caution against depreciation, whereas a softer fix can mean comfort with a weaker unit, or concern over the pace of gains.

For most of the past year, that second interpretation was the one in play. The central bank pegged daily guidance below market expectations for close to a year, a reading traders and analysts took as an effort to temper yuan appreciation. In late August that shortfall was bigger than at any time since February, arriving only a short while after the yuan touched a three-and-a-half-year high against the dollar.

September marks a definite shift in tone. The midpoint has climbed at a quicker clip this month, leaving a smaller gap from market estimates and hinting that the PBOC's pushback against yuan strength has lessened. The PBOC lifted the fixing on eight successive sessions, the longest such streak since 2023, and the rate later climbed to its strongest level since February 2023. Onshore yuan has reached highs last seen in January 2023, while offshore yuan is trading at its strongest since July 2022. Still, the fixing remains considerably below market projections; one recent midpoint came in more than 500 pips beneath a Reuters survey forecast, underlining that Beijing is permitting appreciation on its own terms rather than stepping aside.

The trade-off behind all this is well known. A higher yuan supports stable capital and cheaper imports, yet a sharp advance endangers export competitiveness at a time when the broader Chinese economy remains soft. For market participants, the daily difference between the fixing and consensus is still one of the clearest ways to see how Beijing is balancing those priorities, and whether the recent green light for gains remains in force once the summit has passed.