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Yuan rises as China charts new 5-year economic plan

    SHANGHAI, Oct 30 (Reuters) - The yuan strengthened against
the dollar on Friday after China's leaders endorsed a new
five-year plan to drive sustained economic growth, which markets
believe will require a stronger currency.
    China will promote a "dual circulation" model in the five
years to 2025 and combine efforts to expand domestic demand with
supply-side reforms, the official Xinhua news agency said on
Thursday after a meeting of the biggest of the ruling Communist
Party's elite decision-making bodies.   
    It also will make self-sufficiency in technology a strategic
pillar for development and move to develop and urbanise regions.
    A communique did not spell details or say if there was a
specific percentage growth target, but it said China aims to
boost its gross domestic product (GDP) per person to the level
of moderately developed countries by 2035, while GDP is due to
top 100 trillion yuan ($15 trillion) in 2020.              
    "A resilient currency will aid China's quest to nurture
'dual circulation'," said Eugenia Victorino, head of Asia
strategy at SEB, said in a note. 
    "Against this backdrop, we see continued yuan strength as
inevitable."    
    The onshore yuan opened at 6.7050 per dollar and
was changing hands at 6.6819 at midday, 342 pips firmer the
previous late session close.
    If the yuan retains the gains at late night close, it would
have booked a marginal gain of 0.06% against the dollar this
week.
    Several currency traders said they expect the yuan to swing
around 6.7 per dollar before the Nov. 3 U.S. presidential
election as the outcome remained highly uncertain. 
    Market participants were unwilling to make huge bets ahead
of the election, fearing it could bring massive volatility to
global financial markets.
    A latest Reuters poll also showed that investors scaled back
bullish positions in several emerging Asian currencies,
including the yuan, as they adopt a wait-and-watch approach on
uncertainty ahead of the U.S. election and rising coronavirus
cases globally.
    Several traders told Reuters on Thursday that China's major
state-owned banks have been swapping U.S. dollars for yuan this
week, suggesting monetary authorities are trying to rein in the
sharply appreciating currency.
    A strong yuan and favored yield differentials between China
and other major economies could attract continued capital
inflows to support China's "dual circulation" strategy, but a
too rapid rise in a short period time is not ideal and could
hurt Chinese exporters.
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.7232 per dollar, 28 pips
firmer than the previous fix of 6.726. 
    The global dollar index fell to 93.787 at midday,
when the offshore yuan traded at 6.6803 per dollar. 
    
    The yuan market at 0401 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.7232   6.726     0.04%
                                       
 Spot yuan          6.6819   6.7161    0.51%
                                       
 Divergence from    -0.61%             
 midpoint*                             
 Spot change YTD                       4.21%
 Spot change since 2005                23.86%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         95.22       94.92     0.3
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.787      93.884    -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    6.6803    0.02%
        *                        
 Offshore              6.8485    -1.83%
 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 Kim
Coghill)
  
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