SHANGHAI, Sept 2 (Reuters) - The yuan eased from a 16-month high on Wednesday as the dollar rebounded, snapping a three-day winning streak, while a weaker-than-expected official midpoint rate also discouraged yuan bulls. The dollar bounced off two-year lows after U.S. data pointed to firm manufacturing activity. Prior to the market opening onshore, the People's Bank of China (PBOC) set the midpoint rate at 6.8376 per dollar, 122 pips or 0.18% firmer than the previous fix of 6.8498. It was the strongest guidance rate since May 14, 2019. However, the guided rate was slightly weaker than market expectations of 6.8318, with some traders wondering if the authorities might be starting to get a bit uncomfortable with the currency's recent rapid gains. "The PBOC is yet to send a very strong policy signal against CNY's appreciation vs the USD – the recent 'countercyclical factors' are still small, in comparison with historical CNY appreciation episodes," economists at Goldman Sachs said in a note. They expect broad dollar weakness and widened interest rate differentials between China and the United States to continue, and see downside risk to their 12-month forecast of USD/CNY at 6.7. In the spot market, onshore yuan opened at 6.8320 per dollar and was changing hands at 6.8326 at midday, 51 pips weaker than the previous late session close. It hit a high of 6.81 on Tuesday, the loftiest level since May 10, 2019. The onshore yuan has gained 1.84% to the dollar in August, booking the best month since January 2019, and was up about 2% so far this year. "In particular, stay negative on the USD/CNH, after the pair hit the southbound target at 6.8200 yesterday. Expect some consolidation between 6.8200 and 6.8400, but the sell on rallies preference remains for now," said Terence Wu, FX strategist at OCBC Bank. A trader at a Chinese bank said the market has reached a consensus about a stronger yuan against the backdrop of persistent dollar weakness, with many market participants now looking at 6.8 per dollar as the next resistance level. The global dollar index rose to 92.404 at midday, while the offshore yuan was trading at 6.8352 per dollar. The yuan market at 0331 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.8376 6.8498 0.18% Spot yuan 6.8326 6.8275 -0.07% Divergence from -0.07% midpoint* Spot change YTD 1.91% Spot change since 2005 21.13% revaluation Key indexes: Item Current Previous Change Thomson 93.04 92.87 0.2 Reuters/HKEX CNH index Dollar index 92.404 92.248 0.2 * 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 6.8352 -0.04% * Offshore 6.9947 -2.25% 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 Richard Pullin)
Our Standards: The Thomson Reuters Trust Principles.