The People's Bank of China (PBOC) set the daily central parity rate, or mid-point, for the US dollar against the onshore yuan (CNY) at 6.7854 for the trading session ahead, compared with an estimate of 6.7421.

The fixing marks the strongest level for the yuan since February 8, 2023.

Under China's managed exchange rate system, the central bank publishes the reference rate each trading day before the onshore market opens, and the yuan is permitted to fluctuate within a band of plus or minus 2% around that mid-point. The daily fixing is derived from quotes submitted by designated market-making banks, taking into account the previous day's closing level and movements in the trade-weighted currency basket maintained by the China Foreign Exchange Trade System (CFETS), a mechanism reformed in 2015. That makes the daily reference an important benchmark for mainland trading and a signal that market participants watch closely, even though it does not set the market rate by itself.

The mid-point applies to CNY, the onshore version of China's currency, which trades on the mainland. The offshore yuan (CNH), which trades primarily in Hong Kong and other international centers, is not subject to the daily fixing and can move independently of the onshore rate.

On the liquidity operations side, the volume of the PBOC's 7-day reverse repurchase operations was zero again, while the central bank conducted 327.4 billion yuan of overnight reverse repurchase operations. Reverse repos are short-term instruments used by the central bank to manage liquidity conditions in the banking system, and the split between the two tenors offers a routine read-through on how authorities are meeting short-term funding needs in the market.

Source: ForexLive