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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