Yuan firms as U.S., China leaders’ dialogue eases economic concerns

Georgina Lee HONG KONG, Nov 15 (Reuters) – China’s yuan strengthened on Tuesday as investors cheered an easing of tensions in strained U.S.-China relations after the leaders of the world’s two biggest economies met on the sidelines of the G20 summit. . It also helped ease broader concerns about China’s stuttering economy, underscored by the latest data released earlier in the day, and kept the yuan on course for a fourth straight day of gains against the greenback. The People’s Bank of China set an average rate of 7.0421 per dollar before the market opened, tighter than the previous fixed rate of 7.0899. The spot market opened at 7.0400 per dollar and changed hands at 7.0506 midday, 204 points firmer than the previous late session close and 0.12% softer from the midpoint. Currently, the spot rate is allowed to trade with a range of 2 percent above or below the official fix on any given day. “The meeting between Chinese President Xi Jinping and US President Joe Biden on the sidelines of the G20 summit eased Cold War fears,” DBS senior FX strategist Philip Wee and senior economist Radhika Rao wrote in a client note. During the G20 summit in Bali, Indonesia, both Xi and Biden promised more frequent contact and agreed that US Secretary of State Anthony Blinken would travel to Beijing for further talks. China and the US have been at loggerheads over a range of issues spanning trade, technology and Taiwan, which Beijing claims as its territory. “Since communication channels have been restarted, this should be seen as a positive outcome of the meeting,” Maybank analyst Saktiandi Supaat said. Back home, however, a series of weak Chinese data released earlier, including factory output, retail sales and property investment, highlighted concerns for policymakers. The gloomy data capped gains for the onshore yuan, which rose to a near two-month high against the dollar on Monday, boosted by moves by Beijing to help the real estate sector and ease some of the country’s strict Covid-19 containment measures. “Weakened Chinese hard data for October led to chilly sentiment driven by COVID and property policy direction,” said Ken Cheung, Asia FX strategist at Mizuho Bank. The offshore yuan traded up 0.02 percent on the local exchange at 7.049 per dollar. Offshore one-year non-deliverable futures (NDF), considered the best available proxy for forward-looking market forecasts of the yuan’s value, traded at 6.877, 2.40 percent off the midpoint. One-year NDFs are settled at the midpoint, not the spot rate. The global dollar index rose to 106.975 from a previous close of 106.66. Yuan market at 4:37 GMT: ONSHORE SPOT: item current previous change PBOC midpoint 0.68% 7.0421 7.0899 yuan spot 7.071 0.29% 7.0506 difference from midpoint. repeated index. Item Current Previous Change Thomson Reuters/HKEX 0.0 CNH Index Dollar Index 107.017 0.3 106.66 *Difference in the dollar/yuan exchange rate. A negative number indicates that the spot yuan trade is stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall by 2 percent from the official average rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Spread to Onshore Offshore Spot Yuan * 7.049 0.02% Offshore Non-Deliverables 6.877 2.40% Forwards ** *Premium for Offshore vs. Onshore **The figure represents the spread from PBOC official vs. non-official forwards. midpoint. . (Reporting by Georgina Lee Editing by Sri Navaratnam)

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