PBOC Sets Yuan Midpoint Weaker After Brief Strengthening

On November 6, the central parity rate of the yuan against the US dollar published by the China Foreign Exchange Trade System was 6.7168, 12 basis points weaker than the previous trading day's 6.7156, ending yesterday's brief strengthening trend. The persistently weak midpoint fixing indicates that policymakers are still guiding the market to reduce expectations of one-way appreciation of the yuan.

**The extent of the midpoint's weakness is stabilizing**

Today's midpoint remains about 370 points weaker than the Reuters average market forecast, basically unchanged from yesterday. Earlier this week, this deviation was once as high as 521 points and 660 points, reflecting the central bank's earlier intent to strongly offset appreciation pressure through the midpoint. The deviation stabilizing around 370 points in recent days indicates that, with the dollar index weakening somewhat recently, the central bank's management of exchange rate expectations has moderated from its peak but still maintains a clear counter-cyclical regulatory signal.

**Onshore and offshore rates fluctuate in a narrow range**

At the market trading level, the onshore and offshore yuan exchange rates did not show large fluctuations following the midpoint's weakening. On the previous trading day, the official onshore yuan closing price was 6.6680, and the offshore yuan closed at 6.6646. As of publication, the spot USD/CNH was trading around 6.66725, with the two major market rates still moving in a narrow recent range of 6.66 to 6.67, showing strong resilience. This trend contrasts with the persistently weak midpoint, reflecting that real settlement demand is still providing support for the yuan.

**Market focuses on subsequent policy signals**

The recent pricing pattern of the yuan midpoint has become a market focus. Previously, the onshore yuan had appreciated for multiple consecutive trading days, while the central bank cooled the market through a combination of measures including weakening the midpoint and raising the foreign exchange deposit reserve ratio for financial institutions. The persistent spread between the current midpoint and the market spot rate is interpreted by market sources as regulators intentionally restraining the pace of rapid appreciation, guiding expectations toward two-way fluctuations and avoiding one-sided bets.