Yuan briefly hits 1-week high on Sino-U.S. trade talks

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SHANGHAI — China’s yuan briefly hit a

one-week high against a weaker dollar on Thursday, with

investors encouraged by Chinese and U.S. commerce officials

agreeing to promote healthy trade and cooperate over differences

during discussions by telephone.

China said on Thursday its commerce minister Wang Wentao

spoke to his U.S. counterpart Gina Raimondo, and both sides

recognized the importance of business exchanges and pledged to

keep lines of communication open.

Prior to the market’s open, the People’s Bank of China

(PBOC) set the midpoint rate at 6.3972 per dollar, 16

pips weaker than the previous fix of 6.3956.

In the spot market, onshore yuan opened at 6.3840

per dollar and rose to a high of 6.38, the strongest level since

June 3. By midday, it was changing hands at 6.3854, 11 pips

firmer than the previous late session close.

A trader at a foreign bank said the market would pay close

attention to U.S. inflation data due later in global day, which

could provide a clue to how fast the Federal Reserve will begin

tapering its monetary stimulus.

Closer to home, PBOC governor Yi Gang told a forum in

Shanghai that said he expected China’ss annual average inflation

to be below 2% this year.

Meanwhile, Pan Gongsheng, head of the State Administration

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of Foreign Exchange, said two-way volatility in the yuan

exchange rate would become normal.

By midday, the global dollar index rose to 90.197

from the previous close of 90.14, while the offshore yuan

was trading at 6.3822 per dollar.

The yuan market at 0426 GMT:

ONSHORE SPOT:

Item Current Previous Change

PBOC midpoint 6.3972 6.3956 -0.03%

Spot yuan 6.3854 6.3865 0.02%

Divergence from -0.18%

midpoint*

Spot change YTD 2.24%

Spot change since 2005 29.62%

revaluation

Key indexes:

Item Current Previous Change

Thomson 97.96 97.73 0.2

Reuters/HKEX

CNH index

Dollar index 90.197 90.14 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 6.3822 0.05%

*

Offshore 6.5407 -2.19%

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)