SHANGHAI, Oct 16 (Reuters) - The yuan edged up against the dollar on Friday, underpinned by recent promising economic data, although it was on track for a weekly loss as many traders trimmed their long positions after the central bank lowered forward reserve requirements. Trade and credit lending data this week suggested the world's No.2 economy was recovering faster than expected from the coronavirus shock. Market participants are now waiting for third-quarter GDP data, due next Monday, for more trading cues. China's economy is expected to have grown 5.2% in July-September from a year earlier, faster than the second quarter's 3.2%, a Reuters poll shows. "With the nation leading in the recovery, China's GDP, retail sales and industrial production data will be critical to the confirmation of the resilience seen in Asia/dollar," ANZ said in a note. The onshore yuan opened at 6.7200 per dollar and was changing hands at 6.7223 at midday, 27 pips firmer than the previous late session close. For the week, the yuan is on track for a 0.43% drop. The currency retreated from a 17-month high earlier this week after the People's Bank of China scrapped the reserve requirement ratio for financial institutions when conducting some foreign exchange forwards trading. The adjustment effectively lowered the cost of shorting the unit. "While the PBOC no longer discourages outflows via the FX reserve, it is not encouraging outflows either; hence the stance on spot CNY is best described as neutral," said Frances Cheung, head of macro strategy for Asia at Westpac in Singapore. "We maintain the view for rangetrading in the coming weeks and our year-end target for USD/CNY at 6.75, and 6.5 before end-2021." Bets in favour of the yuan rebounded after a sharp pullback earlier this month, according to a Reuters poll. Prior to market opening, the PBOC set the midpoint rate at 6.7332 per dollar, 42 pips or 0.06% firmer than the previous fix of 6.7374. The global dollar index rose to 93.819 at midday, when the offshore yuan was trading at 6.7175 per dollar. The yuan market at 0401 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.7332 6.7374 0.06% Spot yuan 6.7223 6.725 0.04% Divergence from midpoint* -0.16% Spot change YTD 3.58% Spot change since 2005 revaluation 23.12% Key indexes: Item Current Previous Change Thomson 95.04 94.8 0.3 Reuters/HKEX CNH index Dollar index 93.819 93.794 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 * 6.7175 0.07% Offshore non-deliverable 6.8869 -2.23% 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 Himani Sarkar)
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