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China's yuan nearly flat as c.bank keeps currency on tight leash

Tuesday, 26 Nov 2013 | 11:50 PM ET

* Yuan barely moves since late October after two-week rise

* C.bank midpoint signals intention of yuan stability

* No sign of change of c.bank's tactics for now

* Yuan may stay in narrow range until mid-Dec - traders

SHANGHAI, Nov 27 (Reuters) - The yuan barely moved versus the dollar on Wednesday, continuing a trend seen since late October when it staged a short rally, amid clear signals from the central bank that it plans to keep the currency stable for now. Spot yuan traded at 6.0923 per dollar near midday, almost unchanged from Tuesday's close of 6.0927. The People's Bank of China (PBOC) fixed Wednesday's midpoint at 6.1330, marginally stronger than Tuesday's 6.1357. The central bank has set the official base rate, from which the yuan could rise or fall 1 percent in a day, in a tight range just above 6.14 since early November, signalling that it has no intention to let the yuan move sharply in the near term, traders said. "The market has become very dull this month," said a trader at a Chinese commercial bank in Shanghai. "There is no sign that the PBOC will change its tactics for now." However, the central bank may allow another round of yuan appreciation in the second half of December, several traders said. The PBOC typically allows the yuan to appreciate slightly in the final one or two weeks of a year, so as to make the currency's appreciation in the full year look better. Over a roughly two-week period around mid-October, the PBOC guided the yuan to strengthen 0.6 percent, riding on a slump then of the dollar and ahead of publication of a politically-sensitive currency report by the U.S. Treasury late month. The central bank has controlled the pace of yuan rises since the currency's landmark revaluation in 2005. It has let the currency mainly appreciate during major political events, such as Chinese leaders' visits to the United States or participation in global events, while maintaining stability at other times. The yuan has appreciated 2.3 percent so far this year, making it the best performing currency in emerging Asia.

The onshore spot yuan market at a glance:

Item Current Previous Change PBOC midpoint 6.1330 6.1357 +0.04% Spot yuan 6.0923 6.0927 +0.01% Divergence from midpoint* -0.66% Spot change ytd 2.27% Spot change since 2005 revaluation 35.85%

*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 * 6.0806 0.19% Offshore non-deliverable 6.1470 -0.23% forwards **

*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 central bank suggests faster tempo for freeing yuan

- China investors face bumpy ride as reform speculation intensifies - Unprecedented securitisation plan aims to slow rapid money growth - CHINA MONEY - PBOC preparing market for more yuan volatility

KEY DATA POINTS - Corporate FX behavior reflects yuan appreciation expectations. GRAPHIC: http://link.reuters.com/tyx74t - Hot money returned to China in Sept after two months of outflows 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

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(Reporting by Lu Jianxin and Pete Sweeney; Editing by Kim Coghill)