July 27, 2020 / 5:23 AM / 8 days ago

Yuan set for best day in 2 weeks, but gains capped by Sino-U.S. friction

    HONG KONG, July 27 (Reuters) - The yuan jumped the most in
almost two weeks on Monday, capitalising on a battered U.S.
dollar, but the advance was checked by Sino-U.S. tensions which
escalated with the abrupt closures of consulates last week.
    The onshore yuan firmed 0.24% to trade at 7.0005
per dollar just after midday, set for its strongest session
since July 15. The offshore yuan also managed gains of
0.17%, to stand at 7.0025 per dollar, its best in a week.
    The Chinese currency was on a strong footing against the
global dollar index, which fell more than 0.4% to 93.966,
and hitting its lowest since late 2018 during Asia trading.
    The greenback is under renewed pressure as U.S.-China ties
worsen and also because of a resurgence in coronavirus cases in
the United States which risks spoiling the country's economic
recovery.
    "The renminbi's move today has more to do with the wider
global environment," said Carie Li, economist at OCBC Wing Hang
Bank in Hong Kong, referring to the yuan's other name.    
    But while the yuan scaled gains against the dollar,
frictions between Beijing and Washington pushed the yuan lower
against other peers, said a yuan trader in the onshore market.
    Tensions ramped up after the United States ordered the
closure of the Chinese consulate in Houston last week. China
took over the U.S. consulate premises in Chengdu on Monday
morning, as tit-for-tat retaliation.
    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, slid to 91.55, from the previous close of 91.64.
    "In the near term, the U.S.-China headlines will still
create pressure for the renminbi, especially before the November
U.S. presidential election," said Li.
    The People's Bank of China set the midpoint rate
at 7.0029 per dollar prior to market open, weaker than the
Reuters estimate of 6.9939.

    The yuan market at 0411 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      7.0029   6.9938    -0.13%
                                       
 Spot yuan          7.0005   7.017     0.24%
                                       
 Divergence from    -0.03%             
 midpoint*                             
 Spot change YTD                       -0.53%
 Spot change since 2005                18.23%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         91.55       91.64     -0.1
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.966      94.361    -0.4
 
*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    7.0025    -0.03%
        *                        
 Offshore              7.1431    -1.96%
 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 Jacqueline Wong)
  
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