China’s yuan jumps to 5-month high as investors cheer Biden-Xi meeting

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 (Updates prices, adds details, comments and background)
    SHANGHAI, Nov 16 (Businesshala) - China's yuan surged to a more
than five-month high against the dollar on Tuesday morning, as
investors embraced positive developments in talks between U.S.
President Joe Biden and Chinese leader Xi Jinping.
    Both the onshore and offshore yuan
jumped in morning trade, with the onshore spot price hitting a
high of 6.3666 per dollar, the strongest since June 1, before
changing hands at 6.3726 at midday, up 0.18% from previous late
night close.
    Its offshore counterpart also leapt to 6.3616 at one point,
the loftiest since June 1.
    The virtual meeting here
 between top officials from Beijing and Washington prompted some
investors to raise their bets for improvements in bilateral
relations and chances of partial tariff removals, traders said.
    Trade disputes between the world's two largest economies
have been one of the key factors influencing the yuan and broad
financial market sentiment over the last few years. Chinese
stocks also gained in the morning session.
    "Taking into account mounting U.S. inflationary pressure and
Biden's stance against the tariffs, we are rather optimistic for
some modest conditional tariff cuts, which is one of the ways to
ease U.S. inflation problem but could be politically costly for
the Biden administration," said Ken Cheung, chief Asian FX
strategist at Mizuho Bank.
    Biden and Xi stressed their responsibility to the rest of
the world to avoid conflict as the heads of the two top global
economies opened their talks.
     "I think the (U.S.) president and his secretary of state
are beginning to find channels through which agreement can be
reached," said Carl Tannenbaum, chief economist at Northern
Trust. 
    "And in fact it was just last week that some contemplation
of reducing tariffs against China was floated by Washington, and
that was eagerly received in Beijing. So I want to be careful
and not be overoptimistic."
    The Biden administration was getting traction with China in
talks over Beijing's compliance with a Trump-era trade deal,
U.S. Trade Representative Katherine Tai said last week, but she
declined to predict an outcome while discussions continue.

    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.3924 per dollar, 28 pips
weaker than the previous fix of 6.3896. 
    By midday, the broad dollar index fell to 95.418 from
the previous close of 95.53. 
    
    The yuan market at 0400 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.3924   6.3896    -0.04%
                                       
 Spot yuan          6.3726   6.3839    0.18%
                                       
 Divergence from    -0.31%             
 midpoint*                             
 Spot change YTD                       2.44%
 Spot change since 2005                29.88%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         101.59      101.26    0.3
 Businesshala/HKEX                          
 CNH index                             
 Dollar index    95.418      95.53     -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    6.3684    0.07%
        *                        
 Offshore              6.5395    -2.25%
 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
Christian Schmollinger and Stephen Coates)
  
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