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Yuan eases, Trump's decoupling remarks hit sentiment

Sep 10th 2020, 7:37 pm
Posted by karinaashw

SHANGHAI, Sept 8 (Reuters) - The yuan dipped in thin trade on Tuesday as the dollar steadied and sentiment was dampened by U.S.
President Donald Trump's remarks about economic decoupling with China. Trump on Monday again raised the idea of separating the U.S. and Chinese economies, suggesting the United States would not lose money if the world's two biggest economies no longer did business.

Although a complete separation of the economies is unlikely, the Trump administration has been pushing for a partial decoupling in key areas related to trade, technology and financial activity. The onshore yuan opened at 6.8335 per dollar and was changing hands at 6.8362 at midday, 72 pips weaker than the previous late session close.

A trader at a foreign bank said sentiment was affected by tense Sino-U.S. relations, but given that the U.S. presidential candidates will be debating the topic ahead of November elections, the market is braced for volatility. The yuan trended lower, trading narrowly in a range of about 50 pips, with volume shrinking to $10.739 billion at midday, down from typical half-day volume of about $15 billion. Guan Tao, chief global economist at BOC International (China) and previously a senior official at the foreign exchange regulator, wrote in the state-run Economic Information Daily that the yuan's recent appreciation was part of normal two-way fluctuations in the exchange rate.

He said effective epidemic containment, better-than-expected economic recovery and a broad softer dollar supported the yuan. "But the market has not obviously shaped a yuan strengthening trend or expectation," he said, adding there remained uncertainty in the dollar's movements.

The dollar held on to small overnight gains as investors weighed whether an accommodative turn from the European Central Bank later this week could hit the euro. The global dollar index rose to 93.127 at midday, when the offshore yuan was trading at 6.8376 per dollar.

Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.8364 per dollar, 22 pips firmer than the previous fix of 6.8386. The yuan market at 0400 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.8364 6.8386 0.03% Spot yuan 6.8362 6.829 -0.11% Divergence from 0.00% midpoint* Spot change YTD 1.86% Spot change since 2005 21.07% revaluation Key indexes: Item Current Previous Change Thomson 93.45 93.37 0.1 Reuters/HKEX CNH index Dollar index 93.127 93.056 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 6.8376 -0.02% * Offshore 6.9925 -2.23% 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 Jacqueline Wong)

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