Yuan brushes off stagflation worries, focus shifts to U.S.-China ties

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    SHANGHAI, Nov 10 (Businesshala) - China's yuan held its ground on
Wednesday, as investors shrugged off stagflation worries and
cheered a pickup in inbound funds and the prospect of improving
Sino-U.S. ties.
    The spot yuan opened at 6.3929 per dollar and was
changing hands at 6.3933 at midday, almost unchanged from the
previous late session close.
    The People's Bank of China set the midpoint rate
at 6.3948 per dollar prior to market open, weaker than the
previous fix of 6.3903.
    Asian financial markets were closely watching Chinese
inflation data on Wednesday, which showed factory gate prices
rising at their fastest pace in 26 years amid a power crunch,
further squeezing profit margins for producers.

    But reaction to the data in the yuan market was muted, as
traders focused on news of a virtual meeting planned between
U.S. President Joe Biden and Chinese leader Xi Jinping, as soon
as next week.
    "Soaring China PPI flagged worries of global inflation,"
wrote Ken Cheung, Chief Asian FX Strategist at Mizuho Bank Ltd.
    However, "any positive development in the (Sino-U.S) summit
will fuel optimism on the tariffs cut at the phase one deal
review by year-end."
    The yuan also drew support from continued foreign money
inflows. 
    Global investors raised their holdings of Chinese government
bonds (CGBs) to a new high in October, the latest official data
showed. FTSE Russell's move to start including CGBs into its
World Government Bond Index (WGBI) in October is expected to
eventually drive $130 billion of index-related foreign inflows
into Chinese bonds over a 36-month inclusion period.



    The yuan market at 4:39AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.3948   6.3903    -0.07%
                                       
 Spot yuan          6.3933   6.394     0.01%
                                       
 Divergence from    -0.02%             
 midpoint*                             
 Spot change YTD                       2.11%
 Spot change since 2005                29.46%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         100.56      100.44    0.1
 Businesshala/HKEX                          
 CNH index                             
 Dollar index    94.033      93.972    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    6.3919    0.02%
        *                        
 Offshore              6.5679    -2.64%
 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 Shanghai Newsroom; Editing by Sam Holmes)
  
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