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Yuan inches up on optimism over economic recovery, Q3 GDP eyed

    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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