China's yuan rallies on strong data, breakthrough needs c.bank guidance
* China reports better-than-expected Aug exports growth
* Midpoint stronger but not yet firm signal for yuan rise
* Signs of PBOC policy for strong yuan could send yuan to record highs
SHANGHAI, Sept 9 (Reuters) - China's yuan rose against the dollar on Monday as stronger-than-expected export data added to evidence that the economy may have avoided a sharp slowdown, traders said. Spot yuan changed hands at 6.1170 per dollar near midday, up 0.06 percent from Friday's close of 6.1205. China's exports rose 7.2 percent in August from a year earlier and imports rose 7.0 percent, leaving the country with a trade surplus of $28.6 billion for the month, data showed on Sunday. The People's Bank of China (PBOC) set its daily official midpoint at 6.1642 versus the dollar on Monday, or 0.14 percent stronger than Friday's 6.1728, but traders said a day's stronger midpoint did not point to a firm signal from the central bank to guide the yuan to appreciate. "August data is a good explanation for continuous dollar sales on the yuan market recently," said a dealer at a European bank in Shanghai. "While the yuan's appreciation remains a question due to pressure from the recent depreciation of other Asian currencies, the PBOC's attitude towards the value of the yuan will be crucial." If the central bank sets stronger yuan midpoints for several days in a row, the currency will easily breach the psychologically important level of 6.11 versus dollar as well as its historical record high of 6.109 set on Aug 16, traders said. The yuan has gained 1.86 percent so far this year, bucking the weakening trend of other emerging market currencies. However, the bulk of the yuan's gains were in April and May.
The onshore spot yuan market at a glance:
Item Current Previous Change (pct) PBOC midpoint 6.1642 6.1728 +0.14 Spot yuan 6.1170 6.1205 +0.06
Divergence from midpoint* -0.77 (pct)
Spot change ytd +1.85 Spot change since 2005 revaluation +35.30
*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 the 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 6.1113 +0.09* Offshore non-deliverable 6.2281 -1.03**
*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 - 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 - 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 July show reduction in yuan appreciation expectations. GRAPHIC: http://link.reuters.com/tyx74t - Hot money outflows reach record high in July 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
(Reporting by Lu Jianxin and Pete Sweeney; Editing by Kim Coghill)