Yuan midpoint seen at 6.6977 by Reuters ahead of PBOC daily fix

At around 0115 GMT (2115 US Eastern time the previous evening), the People's Bank of China sets its daily USD/CNY reference rate, a figure that is now among the most closely tracked indicators in Asian currency markets. Its relevance has increased over the last month as Beijing has shifted from trying to hold the yuan back to pushing it up gradually.

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Under the managed-floating system, the onshore yuan can move within 2% of the midpoint set each morning. The PBOC picks that level by taking into account the previous session's close, moves in the dollar and other major currencies, broader global FX conditions and domestic priorities such as capital flows, growth and financial stability. With room for judgement built into the formula, the fixing also works as an expectations-management tool.

Trading onshore starts once the rate is announced and stays within the band. If the yuan is pushed near either edge, the PBOC may step in by buying or selling the currency, tweaking liquidity, or using state-owned banks. That is why the market interprets the fixing as a signal of intent. A stronger-than-forecast midpoint is normally read as a defence against depreciation, while a weaker one can suggest the authorities are comfortable with a softer yuan or uneasy about how fast it is rising.

The second message was the dominant one for roughly a year. The PBOC regularly set the midpoint weaker than analysts projected, a practice traders saw as an attempt to brake appreciation. That gap reached its widest since February in late August, not long after the yuan touched a three-and-a-half-year peak against the dollar.

September changed the course. The central bank raised the fixing for eight consecutive sessions, its longest run since 2023, and the midpoint moved to its strongest since February 2023. The onshore yuan rose to levels not seen since January 2023, while the offshore rate reached its firmest since July 2022. Still, the fixing has remained well below projections, in one case by more than 500 pips against a Reuters survey, a sign that Beijing is taking its foot off the brake rather than releasing it completely.

Goldman Sachs analysts attributed the firmer fixings to the run-up to the recent Trump-Xi summit, a pattern they said fits past diplomatic behaviour, and they expect the authorities to stay comfortable with steady, gradual appreciation.

The trade-off is the same as before. A stronger yuan helps capital stability and makes imports cheaper, but sharp gains could weigh on exporters while the domestic economy stays weak. How far Beijing will allow the yuan to advance, and whether that tolerance extends beyond the summit, is still best read from the daily gap between the fixing and consensus forecasts.