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China's yuan firms after midpoint set at 7-month high

    SHANGHAI, Aug 19 (Reuters) - China's yuan strengthened on
Wednesday after the central bank set the midpoint at a
seven-month high, but tensions between Beijing and Washington
curbed the currency's upside potential.
    The People's Bank of China (PBOC) set the daily fixing
 at 6.9168 per dollar before the market opened, firmer
than the previous fix of 6.9325 and the strongest since Jan. 23.
    The lofty midpoint came after onshore spot yuan
ended its domestic trading session at its firmest against the
dollar in nearly seven months on Tuesday.
    After opening at 6.9168 per dollar on Wednesday, the onshore
yuan was changing hands by 6.9215 at midday, a fraction stronger
than its late-session close.
    The offshore yuan was slightly weaker after rising
to a more than five-month high on Tuesday, trading at 6.9148 per
dollar around midday.
    Traders said that continued uncertainty over the U.S.
economic recovery and ability of lawmakers to pass stimulus
legislation continued to weigh on the dollar, although worries
about fraying Sino-U.S. relations limited the yuan's upside.
    A senior White House official said on Tuesday that no new
high-level talks have been scheduled between the United States
and China, after U.S. President Donald Trump said he postponed  
a planned Aug. 15 review of their trade deal due to frustration
with Beijing's handling of the coronavirus pandemic.

    Traders said the yuan would continue to lag other non-U.S.
currencies in the short term, but could benefit from relatively
high Chinese yields even if the dollar index rebounded.
    In the near term, traders said they were looking to the
release of the minutes of the U.S. Federal Open Market
Committee's July meeting for clues on the Federal Reserve's
policy intentions.
    "Although the yuan continues to be impacted by Sino-U.S.
relations, I still expect appreciation," said a trader at a
Chinese bank. 
    The yuan market at 4:05AM GMT: 
 Item               Current  Previous  Change
 PBOC midpoint      6.9168   6.9325    0.23%
 Spot yuan          6.9215   6.9222    0.01%
 Divergence from    0.07%              
 Spot change YTD                       0.60%
 Spot change since 2005                19.58%
    Key indexes:
 Item            Current     Previous  Change
 Thomson         91.93       91.97     0.0
 CNH index                             
 Dollar index    92.324      92.203    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

 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.9148    0.10%
 Offshore              7.0685    -2.15%
*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 Andrew Galbraith and Jindong Zhang; Editing by
Jacqueline Wong)