People's Bank of China changes yuan fix pattern

The People’s Bank of China strives to limit currency weakening through a mechanism last seen in the U.S.-China trade war in 2019. 

The People's Bank of China set the yuan's midpoint rate at about 7.1 per dollar for the seventh session Thursday. Such measures are taken to support the currency around the level of 7.25, given that the yuan can rise or fall a maximum of 2 percent from the midpoint during the session. During the trade war, the PBOC held the exchange rate at a similar level for nearly a month. Traders backed off bearish bets on the yuan because of the fixing. 

The People's Bank of China has so far refrained from pushing back against the yuan’s decline and taking strict measures. Now the yuan is set to have the biggest annual decline since 1994. Beijing's zero Covid strategy also prevents it from rising, while the Fed's monetary policy tightening widens the US-China rate gap and encourages capital outflows.

On Thursday, the central bank set the yuan's reference rate at a higher-than-expected level for 31 sessions in a row, marking the longest streak on record.