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China's yuan falls on tech rout, Sino-U.S. tensions

    SHANGHAI, Sept 9 (Reuters) - China's yuan touched its
softest level against the dollar in more than a week on
Wednesday on a jump in risk aversion spurred by a fall in
technology shares on Wall Street and worries over Sino-U.S.
relations ahead of the U.S. presidential election.
    The rout in tech firms, partly triggered by concerns over
excess purchases of call options, spooked global investors and
prompted a sharp rally in the dollar index, pushing the
greenback to one-month highs against a basket of rivals.
    Against the backdrop of a stronger dollar, the People's Bank
of China set the midpoint of the yuan's daily trading band
 at 6.8423 per dollar on Wednesday, weaker than the
previous fix of 6.8364. 
    Spot yuan opened at 6.8494 per dollar and
weakened to 6.8565, its softest level since Aug. 31, before
regaining ground to 6.8486 by midday. That was 16 pips weaker
than the previous late session close.
    The offshore yuan briefly weakened past the 6.86 per dollar
level, and was trading at 6.8539 per dollar at midday.
    "Overnight U.S. stocks plunged and the dollar index gained,
leading the yuan lower," said a trader at a Chinese bank. "In
addition, Sino-U.S. tensions have worsened following the SMIC
incident, so the market is being comparatively cautious."
    Proposed U.S. export curbs on chipmaker SMIC
threaten to derail China's growing domestic semiconductor supply
chain, and also hit American and Japanese companies who count
the Chinese chipmaker as an important customer.
    Market expectations for yuan appreciation have temporarily
moderated, with the currency likely to consolidate at current
levels before resuming gains, the trader said.
    Traders and analysts are also watching developments in the
U.S. presidential race for indications of the major candidates'
stances on China policy. 
    On Tuesday, U.S. President Donald Trump escalated attacks on
rival Joe Biden over China, accusing the Democratic candidate of
having an agenda "made in China".
    "With the approaching U.S. election, policy toward China has
become a major part of the argument between the two parties'
candidates, and there is a risk of worsening Sino-U.S.
frictions. This presents a downside risk for the yuan," analysts
at China Construction Bank said in a note. 
    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood at 93.36, after touching a four-month high of
93.49 on Tuesday. 
    The global dollar index fell to 93.484 from the
previous close of 93.542. 

    The yuan market at 4:01AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.8423   6.8364    -0.09%
                                       
 Spot yuan          6.8486   6.847     -0.02%
                                       
 Divergence from    0.09%              
 midpoint*                             
 Spot change YTD                       1.67%
 Spot change since 2005                20.85%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         93.36       93.47     -0.1
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.484      93.542    -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    6.8539    -0.08%
        *                        
 Offshore              7.0125    -2.43%
 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 Andrew Galbraith in Shanghai and Rong Ma in
Beijing; editing by Richard Pullin)
  
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