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Yuan eases slightly ahead of Golden Week holiday

    SHANGHAI, Sept 29 (Reuters) - The yuan slipped in quiet
trade on Tuesday, with traders possibly trimming their exposure
to the Chinese currency as the market wound down ahead of the
Golden Week holiday, which runs from Oct. 1-8.
    The People's Bank of China set the midpoint rate at 6.8171
per dollar prior to market open, 81 pips firmer than the
previous fix of 6.8252. 
    Spot yuan opened at 6.8210 per dollar before
easing to 6.8234 at midday, 128 pips weaker than the previous
late session close.     
    The dollar was steady against a basket of currencies on
Tuesday as traders looked forward to the first U.S. presidential
debate later in the day (Wednesday 0100 GMT), and developments
on the U.S. stimulus bill.  
    Except in 2004, the dollar index tended to rise in October
as the U.S. election approached as the uncertainties reinforced
safehaven demand for the greenback,Ming Ming, chief macro
analyst at CITIC Securities, wrote in report.  
    Analysts also noted investors could reduce their exposure to
yuan as a precaution in case of any increase in Sino-U.S.
tensions during the long holiday break. 
    "While the RMB market lacked clear directions, market
participants might incline to reduce their long RMB position to
mitigate the headline risk of China-US tensions during the
holiday," said Ken Cheung, chief Asia FX strategist at Mizuho,
in a report. 
    China's factory activity likely expanded at a slightly
faster pace in September, a Reuters poll showed on Monday.
 
    China's vast industrial sector is steadily returning to 
levels seen before the pandemic paralysed huge swathes of the
economy early this year. 
    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood at 94.04, weaker than the previous day's
94.08. 
    The global dollar index rose to 94.207 from the
previous close of 94.156. 
    The offshore yuan was trading at 6.8267 per dollar.
    Offshore one-year non-deliverable forwards contracts
(NDFs), considered the best available proxy for
forward-looking market expectations of the yuan's value, traded
at 6.9919, -2.50 percent away from the midpoint.
    One-year NDFs are settled against the midpoint, not the spot
rate.


    The yuan market at 4:08AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.8171   6.8252    0.12%
                                       
 Spot yuan          6.8234   6.8106    -0.19%
                                       
 Divergence from    0.09%              
 midpoint*                             
 Spot change YTD                       2.05%
 Spot change since 2005                21.30%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         94.04       94.08     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    94.207      94.156    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    6.8267    -0.05%
        *                        
 Offshore              6.9919    -2.50%
 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 Luoyan Liu, Han Xiao and Brenda Goh; Editing by
Simon Cameron-Moore)
  
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