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Yuan rises to 1-week high on upbeat econ data and China-backed trade pact

    SHANGHAI, Nov 16 (Reuters) - The yuan rose to a one-week
high against the dollar on Monday morning, underpinned by solid
economic data that showed the fading negative impact from
coronavirus shocks.
    China's industrial output rose at a faster-than-expected
pace in October, while retail sales continued to recover albeit
more slowly than forecast as the world's second-largest economy
emerged from its COVID-19 slump.
    "Data releases in China early Monday adds to the positive,"
Terence Wu, strategist at OCBC Bank in Singapore, said in a
note.
    "Industrial production continued to exceed expectations.
Retail sales were softer than expected, but the market chose to
take heart from the monthly improvement. The posture for USD-CNH
remains sideways to lower in the near term. A sustained run
below 6.6000 would allow 6.5500 to implicitly attract."
    The onshore yuan opened at 6.5850 per dollar and
rose to a high of 6.5798 at one point in morning trade, the
strongest level since Nov.9. By midday, it was changing hands at
6.5826, 234 pips firmer the previous late session close.
    Traders said the signing of a China-backed trade pact also
supported the yuan. Fifteen Asia-Pacific economies formed the
world's largest free trade bloc on Sunday, a China-backed deal
that excludes the United States. 
    Traders and analysts said the Regional Comprehensive
Economic Partnership (RCEP) would improve China's trade
conditions in the region and benefit the yuan.
    "The reason why the central bank has a greater tolerance of
yuan strength is resilient exports since the outbreak of the
pandemic," said Liu Ligang, chief China economist at Citigroup
in Hong Kong.
    "Exports were not affected much by the yuan's strength.
China is ahead of most major economies in resuming work and
production, and China manufactures many products that are needed
by other countries during lockdowns," Liu added.
    Separately, the spot market showed little reaction to the
People's Bank of China's (PBOC) cash injection into the
financial system earlier in the session, after recent defaults
by state firms and sell-offs in the bond market.
    It injected 800 billion yuan ($121.55 billion) in
medium-term loans and kept borrowing costs unchanged for the
seventh straight month.
    Prior to the market opening, the PBOC set the midpoint rate
 at a near one-week high of 6.6048 per dollar, firmer
than the previous fix of 6.6285. 
    The global dollar index fell to 92.581 at midday,
when the offshore yuan was trading at 6.5775 per
dollar. 

    The yuan market at 0401 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.6048   6.6285    0.36%
                                       
 Spot yuan          6.5826   6.606     0.36%
                                       
 Divergence from    -0.34%             
 midpoint*                             
 Spot change YTD                       5.78%
 Spot change since 2005                25.73%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         95.8        95.52     0.3
 Reuters/HKEX                          
 CNH index                             
 Dollar index    92.581      92.651    -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    6.5775    0.08%
        *                        
 Offshore              6.7501    -2.15%
 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.
. 

($1 = 6.5815 Chinese yuan)
    

 (Reporting by Winni Zhou and Andrew Galbraith; Editing by Simon
Cameron-Moore)
  
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