China’s yuan flat after week-long holiday, Sino-U.S. relations in focus

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    SHANGHAI, Oct 8 (Businesshala) - China's yuan slipped in early
trade on Friday as investors returned from a week-long holiday
to play catch-up with broad strength in the greenback, but signs
of positive developments in Sino-U.S. relations limited its
losses.
    The dollar held steady against a basket of currencies ahead
of U.S. labour market data due later in the session, with the
dollar index trading not far from its one-year high. 
    Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate at 6.4604 per dollar,
250 pips or 0.39% firmer than the previous fix of 6.4854, the
strongest level since Sept. 24.
    In the spot market, onshore yuan opened at 6.4490
per dollar and was changing hands at 6.4490 at midday, 10 pips
weaker than the previous late session close last Thursday.
    Several currency traders said the dollar strength during the
long Chinese holiday was offset by positive news on the
relations between Beijing and Washington, while overall market
sentiment had also improved.
    U.S. national security adviser Jake Sullivan and China's top
diplomat, Yang Jiechi, had their first face-to-face encounter
this week since an unusually public and acrid airing of
grievances in Alaska in March. 
    Meanwhile, U.S. President Joe Biden and Chinese President Xi
Jinping have agreed in principle to hold a virtual meeting
before the year's end.
    A trader at a Chinese bank said markets took the meetings as
positive developments in the relations between the world's two
largest economies, as souring bilateral ties have been one of
the key factors influencing the yuan in the last few years.
    "The Chinese yuan is likely to rally moderately versus the
dollar in the weeks ahead," said Gao Qi, FX strategist at
Scotiabank in Singapore.
    "The U.S. and China will likely revive the bilateral trade
talks in the next three months, as the Phase 1 trade deal is set
to expire at the end of this year."
    Earlier this week, U.S. Trade Representative Katherine Tai
said she hoped to hold discussions soon with Chinese
counterparts.
    By midday, the global dollar index rose to 94.249
from the previous close of 94.181, while the offshore yuan
 was trading at 6.4525 per dollar. 
    
    The yuan market at 0405 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.4604   6.4854    0.39%
                                       
 Spot yuan          6.449    6.448     -0.02%
                                       
 Divergence from    -0.18%             
 midpoint*                             
 Spot change YTD                       1.23%
 Spot change since 2005                28.34%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         99.97       99.95     0.0
 Businesshala/HKEX                          
 CNH index                             
 Dollar index    94.249      94.181    0.1
 
    
    
*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% from official midpoint rate it sets each
morning.

    OFFSHORE CNH MARKET   
  
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.4525    -0.05%
        *                        
 Offshore              6.6382    -2.68%
 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 Andrew Galbraith; Editing by Kim
Coghill)
  
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