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Yuan eases ahead of Sino-U.S. trade review, but set for 3rd weekly gain

    SHANGHAI, Aug 14 (Reuters) - The yuan eased against the
dollar in thin trade on Friday, with investors avoiding huge
bets on the local currency ahead of a meeting of U.S. and
Chinese trade officials.
    Senior officials from the world's two largest economies will
hold a video conference on Saturday to review their Phase 1
trade deal signed in January. 
    Market participants believe the meeting is unlikely to yield
a meaningful breakthrough, with huge uncertainties in Sino-U.S.
relations likely to persist.
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.9405 per dollar, 24 pips
firmer than the previous fix of 6.9429. 
    In the spot market, onshore yuan opened at 6.9500
per dollar and was changing hands at 6.9477 at midday, 17 pips
weaker than the previous late session close.
    If the spot yuan finishes the late night session at the
midday level, it would have gained 0.28% to the dollar for the
week, marking its third straight weekly gain.
    Spot prices traded in a tight range of less than 50 pips on
Friday morning, while volume was also thin. Several traders said
they had cleared their positions ahead of the trade discussion. 
    The key market focus remained the trade talks, a trader at a
Chinese bank said. The exchange rate has been very sensitive to
news headlines on Sino-U.S. relations in the past few years.
    Analysts at China Construction Bank (Asia) said the recent
deterioration in relations between Beijing and Washington had
raised uncertainty over the outcome of the trade review.
    "Before key market risks are out of the way, investors will
stay cautious," they said in a note.
    Separately, weaker-than-expected Chinese economic data on
Friday also dampened the yuan.
    China's retail sales slipped in July, dashing expectations
for a modest rise, as consumers in the world's second-largest
economy failed to shake off wariness about the coronavirus,
while the recovery in the factory sector struggled to gain
momentum.
    
    The yuan market at 0400 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.9405   6.9429    0.03%
                                       
 Spot yuan          6.9477   6.946     -0.02%
                                       
 Divergence from    0.10%              
 midpoint*                             
 Spot change YTD                       0.22%
 Spot change since 2005                19.13%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         92.08       92.04     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.278      93.247    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    6.9458    0.03%
        *                        
 Offshore              7.1023    -2.28%
 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
Jacqueline Wong)
  
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