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Yuan extends gains on Sino-U.S. trade relief

    HONG KONG, Aug 26 (Reuters) - The yuan firmed on Wednesday
as it capitalised on the tailwind of an apparent easing in
Sino-U.S. trade tensions after the two sides reaffirmed their
commitment to their Phase 1 agreement, sending the currency
marching towards a seven-month high.
    The onshore yuan climbed 0.1% to 6.9041 per
dollar by midday while the offshore yuan was 0.06% stronger at
6.8994. The Chinese currency sat a whisker away from topping the
January high it reached last week, largely thanks to broad
dollar weakness and U.S. economic woes.
    The latest rally is being supported by easing trade tensions
between Beijing and Washington, said Bruce Yam, forex strategist
at brokerage Everbright Sun Hung Kai. 
    Top U.S. and Chinese trade officials reaffirmed their
commitment to the Phase 1 deal this week, which has seen China
lagging on its obligations to buy American goods.
    The two sides have exchanged barbs and sanctions over the
COVID-19, human rights and technology in recent months. 
    Traders in Shanghai said they largely expect yuan strength
to continue with the dollar still facing broad pressure, not
least from largely soft data and ahead of a key speech by
Federal Reserve Chairman Jerome Powell at Jackson Hole on
Thursday, which some expect could take a more dovish slant.

    The global dollar index was a touch up by 0.1% to
93.106 in Asia morning trade.
    The yuan, however, is not without its own risks. 
    A reversal in Sino-U.S. relations remains on the cards ahead
of the November U.S. presidential election, a potential headwind
for the Chinese currency, analysts at China Construction Bank
(Asia) said in a note.
    The People's Bank of China set the midpoint rate
at 6.9079 per dollar prior to market open, strongest since
January but not far from the Reuters estimate of 6.9086.

    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood 0.13% higher at 92.62.

    The yuan market at 0401 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.9079   6.9183    0.15%
                                       
 Spot yuan          6.9041   6.911     0.10%
                                       
 Divergence from    -0.06%             
 midpoint*                             
 Spot change YTD                       0.86%
 Spot change since 2005                19.88%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         92.62       92.5      0.1
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.106      93.006    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    6.8994    0.07%
        *                        
 Offshore              7.0438    -1.93%
 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 Noah Sin
Editing by Shri Navaratnam)
  
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