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China's yuan jumps as Sino-U.S. trade call eases tensions

    SHANGHAI, Aug 25 (Reuters) - China's yuan strengthened on
Tuesday, with its offshore variant firming to within a whisker
of 6.9 per dollar, after senior U.S. and Chinese officials
expressed optimism over resolving issues around their Phase 1
trade deal.
    U.S. Trade Representative Robert Lighthizer and Treasury
Secretary Steven Mnuchin spoke with Chinese Vice Premier Liu He
in a "regularly scheduled call" on Monday, USTR said in a
statement, adding that both sides "see progress" in implementing
the Sino-U.S. trade deal.
    The offshore yuan rose to a high of 6.9007 per
dollar on the news before pulling back. At midday in China, the
currency stood at 6.9080, 61 pips firmer than Monday's close.
    Onshore spot yuan opened at 6.9099 per dollar and
climbed to a peak of 6.9072 in the morning session. It was
trading at 6.9120 per dollar at midday, firming 70 pips from
Monday's late session close.
    The People's Bank of China had set the onshore yuan's daily
midpoint fixing at 6.9183 per dollar on Tuesday,
firmer than Monday's 6.9194. 
    "Having contact is always a good thing, but (Monday's) call
did not exceed market expectations so it doesn't count as a
major positive factor. Looking at the market's reaction things
are relatively normal," said a trader at a Chinese bank.
    A review of the trade agreement had originally been
scheduled for Aug. 15 but had been delayed, fuelling some
concerns the deal could be ditched amid growing Sino-U.S.
tensions in recent months.
    Both offshore and onshore yuan remained shy of
the seven-month highs they hit against the greenback on Friday.
The yuan has benefited in recent weeks from a recovering
domestic economy and investor inflows into China's stock and
bond markets.
    In China's interbank bond market, news of the call between
U.S. and Chinese trade officials helped boost risk appetite,
pushing treasury futures down sharply and boosting the yield on
benchmark 10-year government bonds above 3%.
    
    The yuan market at 4:00AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.9183   6.9194    0.02%
                                       
 Spot yuan          6.912    6.919     0.10%
                                       
 Divergence from    -0.09%             
 midpoint*                             
 Spot change YTD                       0.74%
 Spot change since 2005                19.74%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         92.52       92.51     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.172      93.276    -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    6.908     0.06%
        *                        
 Offshore              7.0615    -2.03%
 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 and Jindong Zhang; Editing by
Jacqueline Wong)
  
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