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China's yuan jumps to strongest level in 7-1/2 months on weaker dollar

SHANGHAI, June 29 (Reuters) - China's yuan strengthened further against the U.S. dollar on Thursday to its highest level in seven and-a-half months, reflecting the dollar's broad weakness. The People's Bank of China set the yuan midpoint rate at 6.794 per dollar prior to market open, its strongest level since June 15. Thursday's official guidance was 113 pips or 0.2 percent firmer than the previous day's fixing at 6.8053 per dollar. The strength in the yuan fixing followed a weaker dollar trend in global markets. The dollar index, which measures its strength against six other currencies, fell to a low of 95.754 on Thursday - the lowest level since last October. In the spot market, the losses in the U.S. currency pushed the yuan higher. The yuan opened at 6.7966 per dollar, and rose to a high of 6.7722 per dollar in initial trade. As of 0230 GMT, the yuan was changing hands at 6.7818, the strongest level since Nov.9 2016, 179 pips firmer than the previous late session close and 0.18 percent stronger than the midpoint. A Shanghai-based trader at a Chinese bank said Thursday's fixing matched their expectations. "The sudden gains in the yuan were mainly due to strength in non-dollar currencies," the trader said. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.31, weaker than the previous day's 94.33. The global dollar index fell to 95.812 as of 0230 GMT from the previous close of 96.01. The offshore yuan was trading 0.13 percent weaker than onshore spot at 6.7908 per dollar at 0230 GMT. Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.9600, 2.39 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0230 GMT:

ONSHORE SPOT:

Item Current Previous Change PBOC midpoint 6.794 6.8053 0.17% Spot yuan 6.7818 6.7997 0.26% Divergence from -0.18%

midpoint*

Spot change YTD 2.43% Spot change since 2005 22.04%

revaluation

Key indexes:

Item Current Previous Change Thomson 94.31 94.33 0.0

Reuters/HKEX CNH index

Dollar index 95.812 96.01 -0.2

*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 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.7908 -0.13% * Offshore 6.96 -2.39%

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)