SHANGHAI, Oct 30 (Reuters) - The yuan strengthened against the dollar on Friday after China's leaders endorsed a new five-year plan to drive sustained economic growth, which markets believe will require a stronger currency. China will promote a "dual circulation" model in the five years to 2025 and combine efforts to expand domestic demand with supply-side reforms, the official Xinhua news agency said on Thursday after a meeting of the biggest of the ruling Communist Party's elite decision-making bodies. It also will make self-sufficiency in technology a strategic pillar for development and move to develop and urbanise regions. A communique did not spell details or say if there was a specific percentage growth target, but it said China aims to boost its gross domestic product (GDP) per person to the level of moderately developed countries by 2035, while GDP is due to top 100 trillion yuan ($15 trillion) in 2020. "A resilient currency will aid China's quest to nurture 'dual circulation'," said Eugenia Victorino, head of Asia strategy at SEB, said in a note. "Against this backdrop, we see continued yuan strength as inevitable." The onshore yuan opened at 6.7050 per dollar and was changing hands at 6.6819 at midday, 342 pips firmer the previous late session close. If the yuan retains the gains at late night close, it would have booked a marginal gain of 0.06% against the dollar this week. Several currency traders said they expect the yuan to swing around 6.7 per dollar before the Nov. 3 U.S. presidential election as the outcome remained highly uncertain. Market participants were unwilling to make huge bets ahead of the election, fearing it could bring massive volatility to global financial markets. A latest Reuters poll also showed that investors scaled back bullish positions in several emerging Asian currencies, including the yuan, as they adopt a wait-and-watch approach on uncertainty ahead of the U.S. election and rising coronavirus cases globally. Several traders told Reuters on Thursday that China's major state-owned banks have been swapping U.S. dollars for yuan this week, suggesting monetary authorities are trying to rein in the sharply appreciating currency. A strong yuan and favored yield differentials between China and other major economies could attract continued capital inflows to support China's "dual circulation" strategy, but a too rapid rise in a short period time is not ideal and could hurt Chinese exporters. Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7232 per dollar, 28 pips firmer than the previous fix of 6.726. The global dollar index fell to 93.787 at midday, when the offshore yuan traded at 6.6803 per dollar. The yuan market at 0401 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.7232 6.726 0.04% Spot yuan 6.6819 6.7161 0.51% Divergence from -0.61% midpoint* Spot change YTD 4.21% Spot change since 2005 23.86% revaluation Key indexes: Item Current Previous Change Thomson 95.22 94.92 0.3 Reuters/HKEX CNH index Dollar index 93.787 93.884 -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 6.6803 0.02% * Offshore 6.8485 -1.83% 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 Kim Coghill)
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