Yuan slips from record highs, uptrend seen intact until early Sept
* New phase of yuan rise seen engineered by c.bank
* PBOC may want stronger yuan in advance of G20 summit
* Yuan traditionally rises ahead of political events
* Yuan on 'two steps forward, one step back' upward course
SHANGHAI, Aug 19 (Reuters) - China's yuan edged down on Monday after a string of record highs, following weaker central bank guidance, but traders say the currency's latest appreciation trend remains intact. The yuan is likely to continue to appreciate in a measured way until early September, when a G20 summit kicks off in Moscow, traders said. China has traditionally let its currency appreciate ahead of major international political events in a gesture to trading partners who feel the yuan is undervalued. The People's Bank of China (PBOC) is likely to use a two steps forward, one step backward pattern to guide the yuan, and Monday's slightly softer official midpoint is another example of this practice, traders said. "Looking at market conditions, we haven't seen any particular factors that would have pushed the yuan to a slew of record highs in the past two weeks," said a trader at a Chinese commercial bank in Shanghai. "So it appears quite safe to say that the PBOC is behind the latest phase of yuan appreciation," she said. "If so, you cannot expect the yuan to fall back until the G20 summit is over, going by past experience." Spot yuan changed hands around 6.1200 per dollar near midday, 0.08 percent weaker than Friday's close of 6.1150. The currency hit an all-time high of 6.1090 last Friday following a string of record highs since Aug. 8. Monday's step backwards was guided by the PBOC, which set its official midpoint at 6.1690, 0.04 percent weaker than Friday's fix, traders said. Overall, however, the central bank appears to be using a recent weakening in the dollar index and China's better-than-expected export figures in July as reasons to guide the yuan higher in advance of the G20, traders said. The yuan has gained 1.81 percent so far this year, bucking a weakening trend in emerging market currencies, but the bulk of those gains occurred in April and May. After surprisingly weak exports in June, the yuan's rise fizzled out, leading some traders to speculate that the central bank might be seeking mild depreciation. But exports recovered sharply in July, and the PBOC may have let that factor play a part in fuelling the yuan's streak to record highs, traders said.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1690 6.1666 -0.04 Spot yuan 6.1200 6.1150 -0.08
Divergence from midpoint* -0.79 (pct)
Spot change ytd +1.80 Spot change since 2005 revaluation +35.24
*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 1 percent from official midpoint rate it sets each morning.
OFFSHORE CNH MARKET
The offshore yuan market at a glance:
Instrument Current Difference from onshore
Offshore spot yuan 6.1145 +0.09* Offshore non-deliverable 6.2445 -1.21**
*Premium for offshore spot over onshore
**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. .
RECENT DEVELOPMENTS - CHINA MONEY-Faltering exports could mean flat yuan or worse in H2 - Yuan rally starts to fade as capital inflows to China slow
- ANALYSIS-Bullish yuan herd leaves China fundamentals in the dust - Currency war or no, Beijing doesn't want Asia to take stable yuan for granted - China opens new front in money war as yuan speculation distorts export data
KEY DATA POINTS - PBOC's FX assets dropped in June, pointing to possible capital outflows: GRAPHIC: http://link.reuters.com/het22v - Gap between PBOC midpoint and spot rate is narrowing. GRAPHIC: http://link.reuters.com/qyx74t - China's trade surpluses mainly driven by weak imports rather than strong exports. GRAPHIC: http://link.reuters.com/qav68s - Corporate FX purchases in May show reduction in yuan appreciation expectations. GRAPHIC: http://link.reuters.com/tyx74t - Hot money inflows turn to outflows in May GRAPHIC: http://link.reuters.com/saz74t - Despite relatively stable dollar/yuan exchange rate, the yuan is appreciating on a trade-weighted basis. GRAPHIC: http://link.reuters.com/sed74t
(Editing by Jacqueline Wong)