On August 5th, 2019, the People’s Bank of China (PBOC) announced the central rate for USD/CNY at 7.0818, which was slightly lower than the estimated rate of 7.0821. This announcement caused a stir in the foreign exchange market, as it indicated a weakening of the Chinese yuan against the US dollar.
The central rate is the reference rate that the PBOC sets daily for the yuan against the US dollar. It is used as a benchmark for banks and other financial institutions to price their own exchange rates. The PBOC has been adjusting the central rate for USD/CNY on a daily basis since 2005, when it allowed the yuan to float more freely against other currencies.
The slight decrease in the central rate for USD/CNY was unexpected, as many analysts had predicted that the PBOC would set it higher in response to the recent escalation of trade tensions between China and the US. The US had recently announced new tariffs on Chinese goods, and China had responded by allowing its currency to weaken against the US dollar.
The PBOC’s decision to set the central rate lower than expected may have been an attempt to stabilize the yuan and prevent it from depreciating too rapidly. A weaker yuan can make Chinese exports more competitive, but it can also lead to capital outflows and inflation.
The announcement of the central rate for USD/CNY also had an impact on other currencies in the region. The Japanese yen and the Australian dollar both weakened against the US dollar, as investors sought safe-haven assets amid the uncertainty caused by the trade tensions.
Overall, the PBOC’s announcement of the central rate for USD/CNY at 7.0818 was a significant event in the foreign exchange market. It indicated that China was taking steps to manage its currency in response to external pressures, and it had an impact on other currencies in the region. As the trade tensions between China and the US continue to escalate, it will be interesting to see how the PBOC responds and how the foreign exchange market reacts.
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- Source: https://zephyrnet.com/pboc-sets-usd-cny-central-rate-at-7-0818-vs-estimate-at-7-0821-forexlive/
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