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Yuan rebounds as Biden's White House chances raise trade truce hopes

    SHANGHAI, Nov 5 (Reuters) - The yuan rebounded on Thursday
as growing prospects of a Joe Biden presidency in the United
States raised investor expectations of a less problematic trade
relationship between the world's two largest economies.
    Victories in Michigan and Wisconsin gave Biden a critical
boost in the race against President Donald Trump to obtain 270
votes in the state-by-state Electoral College needed to win the
White House.
    The yuan had a roller-coaster ride in the previous two days,
swinging from an over three-week low to a near 28-month high, as
  investor sentiment was heavily affected by the dollar's
reaction to the fast changing election dynamics.
    "The USD/CNH was perhaps the most reactive pair to the odds
of a Trump upset," said Terence Wu, FX strategist at OCBC Bank.
    "The prospects of a Biden win, and perhaps a more
conventional and rules-based trade policy eventually pushed the
pair to close at a low of 6.6200, our target for a RMB-positive
election outcome."
    In the spot market, the onshore spot yuan opened
at 6.6400 per dollar and jumped to a high of 6.6381 at one
point, the strongest level since July 10, 2018. By midday, it
was changing hands at 6.6506, 44 pips firmer than the previous
late session close.
    Many investors expect a Biden presidency should benefit the
yuan, as he is more likely to adopt a multilateral approach and
less likely to prolong Trump's trade war that has weighed on the
Chinese currency over the last two years.
    While the spot market did not immediately react to Chinese
President Xi Jinping's pledge to expand imports in the next
decade, traders said opening-up measures should benefit the yuan
in the long run.
    Xi told the opening of an annual import show that China will
import over $22 trillion worth of goods over the next decade and
that the economy is continuing to open up despite the
coronavirus pandemic.
    "China's further opening-up of its domestic trade and
financial markets will certainly boost the CNH, KRW and SGD
particularly if Biden wins the presidency," Gao Qi, strategist
at Scotiabank in Singapore, said in note.
    Prior to market opening, the People's Bank of China set the
midpoint rate at 6.6895 per dollar, 124 pips or 0.19%
weaker than the previous fix of 6.6771. 
    The global dollar index fell to 93.384 at midday,
when the offshore yuan was trading at 6.645 per dollar
as of midday.

    The yuan market at 0401 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.6895   6.6771    -0.19%
                                       
 Spot yuan          6.6506   6.655     0.07%
                                       
 Divergence from    -0.58%             
 midpoint*                             
 Spot change YTD                       4.70%
 Spot change since 2005                24.45%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         95.56       94.93     0.7
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.384      93.401    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    6.645     0.08%
        *                        
 Offshore              6.8126    -1.81%
 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 Sam
Holmes)
  
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