for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up

Yuan weakens after China 3Q GDP misses expectations

    SHANGHAI, Oct 19 (Reuters) - The yuan weakened on Monday,
pulling back from early gains after new data showed China's
economy grew at a slightly slower-than-expected pace in the
third quarter, but traders and analysts said broader economic
trends continued to support the currency.  
    China's recovery accelerated in the third quarter, but 
overall gross domestic product growth of 4.9% missed forecasts,
highlighting continued challenges facing the world's
second-largest economy as it emerges from the coronavirus
crisis.
    Traders said they saw some dollar buying when the data came
in below forecast, but expectations of a stable, strengthening
yuan limited the Chinese currency's fall.
    "There was some dollar buying front-running the data
release, but the data had a small impact on the exchange rate,"
said a trader at a Chinese bank. "I expect the yuan to continue
to trade in a range. There's still support for USDCNY at the
March 2019 low." 
    The People's Bank of China set the midpoint of the yuan's
daily trading band at 6.701 per dollar on Monday, its
firmest level since April 18, 2019, after the yuan finished its
onshore session at an 18-month peak on Friday.
    Spot yuan opened at 6.6930 per dollar and
strengthened to a top of 6.6857 before the data release. At
midday, it was changing hands at 6.7005 per dollar, 15 pips
weaker than its late session close on Friday.
    The offshore yuan was little changed at 6.696 per
dollar.
    Traders and analysts say that the policy gap between China
and the rest of the world as its economy recovers would continue
to support factors benefitting the yuan, including rising
foreign interest in Chinese bonds.
    "The likely continuation of prudent monetary policy will
likely sustain the fairly significant interest rate differential
we see between China and many other parts of the world. And that
significant interest rate differential ... is likely to continue
to drive inflows into both China government bonds and
increasingly into China credits more broadly," said Ben Powell,
Asia Pacific chief investment strategist at the BlackRock
Investment Institute in Singapore. 
    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 6.8579 on Monday.
    
    The yuan market at 4:09AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.701    6.7332    0.48%
                                       
 Spot yuan          6.7005   6.699     -0.02%
                                       
 Divergence from    -0.01%             
 midpoint*                             
 Spot change YTD                       3.92%
 Spot change since 2005                23.52%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         95.28       95.26     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.751      93.699    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    6.696     0.07%
        *                        
 Offshore              6.8579    -2.29%
 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 Andrew Galbraith and Jindong Zhang; Editing by
Simon Cameron-Moore)
  
for-phone-onlyfor-tablet-portrait-upfor-tablet-landscape-upfor-desktop-upfor-wide-desktop-up