Yuan retreats from 7-month peak, shrugs off no change to lending rate

    SHANGHAI, Aug 20 (Reuters) - The yuan eased off seven-month
highs hit a day earlier, as the dollar rebounded and the market
took in stride no change to a benchmark lending rate for
corporate and household loans.
    The dollar clung to Wednesday's gains, after minutes from
the latest U.S. Federal Reserve meeting gave few clues about
whether an even more dovish shift in its policy framework is
possible in the autumn, disappointing some dollar bears.
    Prior to market opening on Thursday, the People's Bank of
China set the midpoint rate at 6.9274 per dollar,
0.15% weaker than the previous fix of 6.9168. 
    Onshore yuan opened at 6.9292 per dollar and was
changing hands at 6.9219 at midday, 26 pips weaker than the
previous late session close.
    The spot price hit a high of 6.9034 on Wednesday, the
strongest since Jan. 22.
    Traders said the yuan's medium-term outlook was still
dependent on Sino-U.S. relations.
    A Bloomberg News report on Thursday, citing an unnamed
source, said that Beijing and Washington planned to reschedule
trade talks postponed from last weekend.
    Earlier, U.S. President Donald Trump said he had postponed
the Aug. 15 review of the trade agreement signed with China in
January given his frustration over Beijing's handling of the
coronavirus pandemic. "I postponed talks with China. You know
why? I don't want to deal with them now."
    As long as the trade deal remained intact, the yuan should
be supported in the longer run, said a trader at a Chinese bank.
    Meanwhile, the market had a muted reaction after China kept
the loan prime rate (LPR) steady at its August fixing, as
expected and for the fourth month in a row.
    Iris Pang, chief economist for Greater China at ING, said
Thursday's move could indicate there would be no broad-based
easing for the rest of the year.
    "We expect monetary policy on interest rates ... to remain
the same for the rest of 2020 as China's COVID-19 infection
cases have been stabilised," she said.
    "We also expect there will be no broad-based reserve
requirement ratio (RRR) cut, but there could be targeted RRR cut
or targeted re-lending for small and mid-sized enterprises
(SMEs) and the agricultural sector."
    Pang expects the yuan to finish the year at 6.97 per dollar.
    The yuan market at 0401 GMT: 
 Item               Current  Previous  Change
 PBOC midpoint      6.9274   6.9168    -0.15%
 Spot yuan          6.9219   6.9193    -0.04%
 Divergence from    -0.08%             
 Spot change YTD                       0.60%
 Spot change since 2005                19.57%
    Key indexes:
 Item            Current     Previous  Change
 Thomson         92.28       91.92     0.4
 CNH index                             
 Dollar index    92.974      92.991    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

 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.9182    0.05%
 Offshore              7.0626    -1.91%
*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)