China yuan inches up on Sino-US trade hopes, but set for 1st losing week in over month

SHANGHAI, Jan 18 (Reuters) - China's yuan was supported
against the dollar on Friday after a report raised hopes of a
deal in Sino-U.S. trade talks, though the local currency was
still on course for its first losing week in more than a month.

The Wall Street Journal reported on Thursday that U.S.
Treasury Secretary Steven Mnuchin discussed lifting some or all
tariffs imposed on Chinese imports and suggested offering a
tariff rollback during trade discussions. But the report was
quickly denied by the Treasury Department.
Analysts at OCBC Bank said they retain the view that yuan
would remain in "a consolidative mood", pending more concrete
developments in the Sino-U.S. trade front.
A few traders also said the prevailing uncertainty over
prospects for a trade deal between the world two biggest
economies capped the yuan's gains on the day.
China's Vice Premier Liu He will visit the United States on
Jan. 30 and Jan. 31 for the next round of trade negotiations.
Prior to market opening on Friday, the People's Bank of
China (PBOC) set the midpoint rate at 6.7665 per
dollar, 73 pips or 0.1 percent weaker than the previous fix of
6.7592.
In the spot market, the onshore yuan opened at
6.7720 per dollar and was changing hands at 6.7773 at midday, 17
pips firmer than the previous late session close.
If the onshore spot yuan closes out the late night session
at the midday level, it would have lost 0.16 percent for the
week, compared with a sharp rise of 1.54 percent a week earlier.
Traders said the dollar's broad performance and the
Sino-U.S. trade tensions remained the two key factors driving
the yuan for now, as the impact from corporate flows faded.
Companies usually convert their dollars for the local
currency to meet a myriad of payments and financing needs ahead
of the Lunar New Year holiday, which starts in early February
this year.
FX strategists at Morgan Stanley said they turned bullish on
the yuan.
"The PBOC is likely to have a hands-off approach on CNY
during the trade negotiations and find it difficult to remove
the countercyclical factor," they said in a note.
The factor, first introduced by the PBOC in May 2017, is
designed to curb speculation and volatility in the yuan.
The Morgan Stanley analysts said the central bank has an
incentive to keep the yuan stable to encourage foreign capital
inflows.
The dollar index was down at 96.063 at midday from
the previous close of 96.065.
The offshore yuan was trading at 6.784 per dollar
as of midday.

The yuan market at 0355 GMT:

ONSHORE SPOT:
Item Current Previous Change
PBOC midpoint 6.7665 6.7592 -0.11%

Spot yuan 6.7773 6.779 0.03%

Divergence from 0.16%
midpoint*
Spot change YTD 1.41%
Spot change since 2005 22.12%
revaluation

Key indexes:

Item Current Previous Change

Thomson 94.25 94.44 -0.2
Reuters/HKEX
CNH index
Dollar index 96.063 96.065 0.0



*Divergence of the dollar/yuan exchange rate. Negative number
indicates that spot yuan is trading stronger than the midpoint.
The People's Bank of China (PBOC) allows the exchange rate to
rise or fall 2 percent from official midpoint rate it sets each
morning.

OFFSHORE CNH MARKET

Instrument Current Difference
from onshore
Offshore spot yuan 6.784 -0.10%
*
Offshore 6.8093 -0.63%
non-deliverable
forwards
**

*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint,
since non-deliverable forwards are settled against the midpoint.
.

(Reporting by Winni Zhou and John Ruwitch
Editing by Shri Navaratnam)


2019-01-18 06:40:51

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