July 14, 2020 / 5:12 AM / 23 days ago

Yuan set for worst day in three weeks as shares fall, Sino-US tensions rise

    SHANGHAI, July 14 (Reuters) - The yuan eased and looked set
for its worst day in nearly three weeks, dragged lower by losses
in the A-share market, while risk appetite also soured after
renewed diplomatic tension between the United States and China.
    Chinese shares fell in morning session, with both benchmark
Shanghai Composite Index and blue-chip CSI 300 Index
 falling more than 1%, as investors took profits after
a torrid bull run.
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.9996 per dollar, 31 pips
or 0.04% weaker than the previous fix of 6.9965. 
    In the spot market, onshore yuan opened at 7.0120
per dollar and was changing hands at 7.0107 at midday, 127 pips
weaker than the previous late session close.
    If the yuan finishes the late night session at the midday
level, it would have lost 0.18% to the dollar on the day,
marking the biggest one-day weakening in percentage terms since
June 24.
    Yuan traders said the market continued to consolidate at
around the key 7 per dollar level as better-than-expected trade
data lent some support, preventing the yuan from sinking
further.
    China's exports unexpectedly rose in June as overseas
economies reopened after lockdowns, while imports grew for the
first time this year, reinforcing views the recovery from the
pandemic is gaining traction in the world's second-largest
economy.
    However, analysts at Huatai Securities pointed out that
Sino-U.S. relations would remain the key factor leading yuan's
movements in the remainder of the year.
    The United States on Monday rejected China's disputed claims
to offshore resources in most of the South China Sea, a move
that Beijing criticized as inciting tensions in the region and
which highlighted an increasingly testy relationship.
    The global dollar index rose to 96.56 at miday from
the previous close of 96.553. 
    The offshore yuan was trading at 7.0126 per dollar
by noon. 
    
    The yuan market at 0409 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.9996   6.9965    -0.04%
                                       
 Spot yuan          7.0107   6.998     -0.18%
                                       
 Divergence from    0.16%              
 midpoint*                             
 Spot change YTD                       -0.68%
 Spot change since 2005                18.06%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         92.59       92.6      0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    96.56       96.553    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    7.0126    -0.03%
        *                        
 Offshore              7.1474    -2.07%
 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 Simon
Cameron-Moore)
  
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