China’s yuan off near 1-month high on worries over elevated basket index

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    SHANGHAI, Oct 12 (Businesshala) - China's yuan on Tuesday eased
from a near one-month high against the dollar hit a day earlier,
as the currency's strength against those of its major trading
partners raised investor concern of a dampening effect on
exports.
    Still, the yuan slipped relatively less than its peers
against a rising dollar, which currency traders said reflected
recent positive developments in Sino-U.S. relations.
    Persistent strength in the yuan against a basket of
currencies has unsettled some market participants who
have held back from testing new highs, traders said. The market
will pay close attention to trade data due on Wednesday for any
signs a stronger yuan has had an impact on China's exports.
    Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate at 6.4447 per dollar, 32
pips or 0.05% firmer than the previous fix of 6.4479, the
strongest since Sept. 16. 
    The firmer official guidance pushed China's trade-weighted
yuan basket index to a fresh more than 5-1/2-year
high of 100.26, up 5.71% so far this year, according to Businesshala'
calculations based on official data.     
    In the spot market, onshore yuan opened at 6.4602
per dollar and was changing hands at 6.4530 at midday, 17 pips
weaker than the previous late session close.
    The spot price touched a high of 6.4340 per dollar on
Monday, the strongest since Sept. 16.
    Apart from the strong basket index, "markets were also
cautious about the timing of U.S. Federal Reserve's policy
tapering, as such tightening could boost the dollar and reverse
the yuan's strengthening trend," said a trader at a Chinese
bank.
    Separately, markets were waiting on whether the PBOC would
take any policy action when rolling over a batch of 500 billion
yuan ($77.5 billion) worth of medium-term loans due on Friday.
    "At first glance, it appears that the PBOC reserves plenty
of policy room for easing while the Fed has to pull the trigger
on the tapering soon and bring forward its rate hike timing to
curb inflation," said Ken Cheung, chief Asian FX strategist at
Mizuho Bank in Hong Kong. 
    "Yet, the surging China PPI suggested that the PBOC might
not have such ample policy leeway to deliver an aggressive rate
cut."
    Elsewhere, some signs of liquidity tightness emerged in Hong
Kong, with the offshore yuan's overnight CNH HIBOR
rising to 4.425%, the highest since Aug. 31.
    Some traders and market analysts said such tightness came as
banks in Hong Kong scrambled for short-term liquidity before a
possible local market closure due to a typhoon.
    By midday, the global dollar index stood at 94.337,
while the offshore yuan was trading at 6.455 per
dollar. 
    
    The yuan market at 0401 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.4447   6.4479    0.05%
                                       
 Spot yuan          6.453    6.4513    -0.03%
                                       
 Divergence from    0.13%              
 midpoint*                             
 Spot change YTD                       1.17%
 Spot change since 2005                28.26%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         100.06      100.22    -0.2
 Businesshala/HKEX                          
 CNH index                             
 Dollar index    94.337      94.375    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% from official midpoint rate it sets each
morning.

    OFFSHORE CNH MARKET   
  
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.455     -0.03%
        *                        
 Offshore              6.642     -2.97%
 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.
. 

($1 = 6.4526 Chinese yuan)
    

 (Reporting by Winni Zhou and Andrew Galbraith; editing by
Richard Pullin)
  
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