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Yuan firms, set for longest weekly winning streak since 2018

    SHANGHAI, Sept 4 (Reuters) - The yuan inched up on Friday
and looked set for a sixth week of gains, its longest winning
streak since early 2018, buoyed by broad dollar weakness.
    Investors are now shifting their attention to key U.S. jobs
data due later on Friday to gauge the pace of recovery in the
world's largest economy from the pandemic, which could spark
volatility in the greenback and major currencies.
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.8359 per dollar, the first
weakening in nine days, 40 pips or 0.06% softer than the
previous fix of 6.8319. 
    In the spot market, onshore yuan opened at 6.8402
per dollar and was changing hands at 6.8416 at midday, 54 pips
firmer than the previous late session close. 
    The spot price hit a 16-month peak of 6.81 per dollar
earlier this week, but pared some of its gains after the dollar
managed to regain its footing. But still, the Chinese currency
is up 0.34% against the dollar for the week.
    "There may be a consolidation period (for the yuan) in the
near term as the DXY downtrend seems to be coming to a pause,"
said Frances Cheung, head of macro strategy for Asia at Westpac.
    "But beyond these short-term dynamics, fundamentals remain
supportive of the CNY, in particular the prospect of more flows
into bonds, yield differentials and growth outperformance."
    Economists at Morgan Stanley also said continued capital
inflows should support the yuan and they expected the currency
to trade at 6.6 per dollar by end-2021.
    ING, joining other global investment banks in revising up
forecasts and betting the recent rally will be sustained, now
sees the Chinese currency trading at 6.7 per dollar at the end
of this year from the previous forecast of 6.97.
    The global dollar index traded at 92.796 at midday,
when the offshore yuan was trading at 6.8461 per
dollar. 
    
    The yuan market at 4:03AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.8359   6.8319    -0.06%
                                       
 Spot yuan          6.8416   6.847     0.08%
                                       
 Divergence from    0.08%              
 midpoint*                             
 Spot change YTD                       1.78%
 Spot change since 2005                20.97%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         93.18       93.33     -0.2
 Reuters/HKEX                          
 CNH index                             
 Dollar index    92.796      92.837    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    6.8461    -0.07%
        *                        
 Offshore              7.0024    -2.38%
 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 Winni Zhou and Andrew Galbraith; Editing by
Jacqueline Wong)
  
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