July 17, 2020 / 4:56 AM / a month ago

CORRECTED-Yuan retreats as China's stocks tire of rallying, U.S. pressure builds

 (Corrects to state China's stock market fell the most since Feb
on Thursday, not that it snapped a long rally, in third
paragraph)
    HONG KONG, July 17 (Reuters) - The yuan edged down on Friday
as the Chinese stock market gave up more gains from a long rally
on worries that Beijing may start to scale back policy support
and as Washington ramped up political pressure amid worsening
U.S-Sino relations. 
    The onshore yuan weakened 0.16% to 7 per U.S.
dollar by 0411 GMT, while the offshore yuan was just
0.02% softer at 6.9985 per dollar. The global dollar index
 was pretty much flat at 96.269. 
    The Chinese stock market extended its fall on Friday. It
fell the most since February on Thursday as investors cooled
their buying spree on signs of policy tightening after
better-than-expected economic numbers.
    "Going forward, there may not be as much hot money coming
in, when other markets and global economy are also recovering,"
said Bruce Yam, forex strategist at brokerage Everbright Sun
Hung Kai in Hong Kong.
    Tense U.S.-China relations also weighed on the yuan.
    The Trump administration may ban all members of China's
ruling Communist Party and their families from traveling to the
United States, while the U.S. Attorney General called companies
such as Disney "pawns of Chinese influence".

    "Although China became first major economy to expand since
the coronavirus, investors could not shake off the rapid
deterioration in US-China relations," analysts at DBS wrote in a
note on Friday.
    The onshore yuan is set to end the week flat, while the
offshore yuan is just 0.2% firmer than in the previous week.
    The People's Bank of China set the midpoint rate
at 7.0043 per dollar prior to Friday's market open, slightly
softer than the Reuters estimate of 6.9957.


    The yuan market at 0411 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      7.0043   6.9913    -0.19%
                                       
 Spot yuan          7        6.9891    -0.16%
                                       
 Divergence from    -0.06%             
 midpoint*                             
 Spot change YTD                       -0.53%
 Spot change since 2005                18.24%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         92.67       92.59     0.1
 Reuters/HKEX                          
 CNH index                             
 Dollar index    96.269      96.277    0.0
    
*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    6.9985    0.02%
        *                        
 Offshore              7.1269    -1.72%
 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)
  
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