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Yuan slips as global economic risks drive dollar higher

    SHANGHAI, Sept 24 (Reuters) - China's yuan eased against the
dollar on Thursday, as concerns about the global economy
supported a safe-haven rally in the greenback against most Asian
currencies.
    The dollar held its broader gains on Thursday as signs of an
economic slowdown in Europe and in the United States revived
concerns about the fallout from a second wave of coronavirus
infections.
    Analysts said warnings against a rapid rise in the Chinese
currency also helped check recent gains. 
    "I would expect the renminbi to weaken as it's too strong
now which could hurt China's exports," said Bruce Yam, forex
strategist at brokerage Everbright Sun Hung Kai. "The PBOC does
not want too strong a yuan."
    A softer central bank fixing guided the yuan lower on
Thursday. The People's Bank of China set the midpoint rate for
its daily trading band at 6.8028 per dollar prior to
market open, its weakest fixing since Sept. 15.
    The spot market opened at 6.8160 per dollar and
was changing hands at 6.8170 at midday, 80 pips weaker than the
previous late session close.  
    The currency has softened since touching 6.7501 to the
dollar on Sept. 17, its strongest level since late April 2019. 
    "The yuan's fall today is mainly due to a relatively strong
dollar index," said a Shanghai-based trader at a foreign bank. 
    China should raise the costs of short-term, cross-border
money flows to buffer its financial markets from speculative
capital, said Zhu Min, head of the National Institute of
Financial Research at Tsinghua University, as cited by the
People's Daily.
    China's foreign exchange regulator granted fresh quotas
under its outbound Qualified Domestic Institutional Investor
(QDII) scheme for the first time since April 2019, official data
showed. 
    The move by the State Administration of Foreign Exchange
(SAFE) comes as the yuan has strengthened against the dollar
over the past weeks amid accelerating foreign money inflows and
a recovering economy. 
    The Thomson Reuters/HKEX Global CNH index, which
tracks the offshore yuan against a basket of currencies on a
daily basis, stood at 94.04, weaker than the previous day's
94.12. 
    The global dollar index rose to 94.386 from the
previous close of 94.384. 
    The offshore yuan was trading at 6.8215 per dollar.
    Offshore one-year non-deliverable forwards contracts
(NDFs), considered the best available proxy for
forward-looking market expectations of the yuan's value, traded
at 6.9734, -2.45 percent away from the midpoint.
    One-year NDFs are settled against the midpoint, not the spot
rate.


    The yuan market at 3:40AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.8028   6.7986    -0.06%
                                       
 Spot yuan          6.817    6.809     -0.12%
                                       
 Divergence from    0.21%              
 midpoint*                             
 Spot change YTD                       2.14%
 Spot change since 2005                21.41%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         94.04       94.12     -0.1
 Reuters/HKEX                          
 CNH index                             
 Dollar index    94.386      94.384    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    6.8215    -0.07%
        *                        
 Offshore              6.9734    -2.45%
 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 Luoyan Liu, Ma Rong and Andrew Galbraith; Editing
by Sam Holmes)
  
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