The People's Bank of China (PBOC) has adjusted the USD/CNY central parity rate to 6.9223 for Monday's trading session, a notable weakening from Friday's 6.9141 fix. The weaker fixing came as the Iran war supported the dollar.
MECHANICS OF THE FIX
China's managed floating exchange rate system relies on this daily midpoint, set each morning by the PBOC, around which the onshore yuan can fluctuate within a ±2% band. Under the PBOC's mechanism, the midpoint reflects the previous day's closing rate and overnight moves in a basket of major currencies.
Once announced, USD/CNY trades freely within the band during onshore hours.
MARKET CONTEXT
The yuan slid to a three-week low as the Iran war supported the dollar. The renminbi has still outperformed most other emerging-market currencies this month, analysts at CICC said, although it is down about 0.9% against the dollar.
POLICY SIGNAL
The 6.9223 fix was the weakest since 2 March, when it was set at 6.9236, according to China Foreign Exchange Trade System data.