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Yuan leaps to 17-month high, set for best day since 2005

 (Adds comments and table, updates prices)
    SHANGHAI, Oct 9 (Reuters) - The yuan leapt to a 17-month
high against the dollar on its first trading day after a
week-long national holiday and was set for its strongest one-day
gain since 2005, when Beijing de-pegged its currency from the
greenback.
    Market sentiment was boosted as U.S. Democratic presidential
candidate Joe Biden widened his lead over President Donald Trump
in a raft of new polls.
    Currency traders said the results were positive for the yuan
as many investors expect a Biden Administration to drop a
unilateral tariff approach in its dealings with China, lowering
the risk of a fresh trade war.
    Trade disputes between the United States and China have been
the key factor weighing on the yuan in recent years.
    Friday's steep gain also came as the currency played
catch-up to its offshore counterpart after the Golden
Week holiday, and was guided higher by the central bank, traders
and analysts said.
    The onshore spot yuan opened at 6.7300 per dollar
and jumped to a high of 6.7089 at one point in morning trade,
the strongest level since April 23, 2019.
    It was changing hands at 6.7126 at midday, 864 pips or 1.29%
firmer on day, marking the biggest one-day rise since July 2005
when China revalued its currency by 2.1% and dropped a
decade-old peg against the dollar.
    "Today's CNY fixing had a strong bias ... I think the main
message is that the PBOC is allowing further renminbi
appreciation at this level, so markets are positioning for a
renminbi rally," said Ken Cheung, chief Asian FX strategist at
Mizuho Bank in Hong Kong.
    "The U.S. election is another driver ... Polls are showing
that Biden is taking the lead," Cheung said. "It means the risks
of resuming a new trade war are getting smaller, so I think this
is positive for the renminbi."
    Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate at 6.7796 per dollar,
109 pips firmer than Reuters' estimate of 6.7905.
    "China reopened today to a festive risk-on mood, so we
should expect a strong move higher with a focus on domestic
consumption, tourism, renewable energy," said Stephen Innes,
chief global markets strategist at Axi.
    Official data showed a rebound in consumer spending over the
Golden Week holiday, suggesting continued economic recovery from
coronavirus shock. The Ministry of Commerce said on Thursday
that daily retail sales between Oct. 1-8 rose 4.9% from a year
earlier.
    As of midday, the global dollar index fell to 93.451,
while the offshore yuan was trading at 6.7048 per dollar. 
    
    The yuan market at 0400 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.7796   6.8101    0.45%
                                       
 Spot yuan          6.7126   6.799     1.29%
                                       
 Divergence from    -0.99%             
 midpoint*                             
 Spot change YTD                       3.73%
 Spot change since 2005                23.30%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         95.07       94.79     0.3
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.451      93.549    -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    6.7048    0.12%
        *                        
 Offshore              6.871     -1.33%
 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 in Shanghai and Tom Westbrook in
Singapore; Editing by Sam Holmes and Richard Pullin)
  
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