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China's yuan firms on stronger fixing, Q2 GDP data shrugged off

SHANGHAI, July 17 (Reuters) - China's yuan, which has firmed against the U.S. dollar the past five sessions, strengthened again on Monday after the central bank lifted its official guidance for the Chinese currency's midpoint to an 8-1/2 month high. Traders said the yuan was strengthened mainly by the midpoint setting, and was not impacted by news that China had slightly better-than-expected 6.9 percent economic growth in the second quarter. Multiple traders said some major state-owned banks sold dollars in the onshore spot market on Monday morning, but the volume was not as heavy as seen in early July. Before market opening, China's central bank set the yuan midpoint at 6.7562 per dollar, its strongest level since Nov. 4, reflecting the dollar's broad weakness. Monday's official guidance was 212 pips or 0.3 percent firmer than the previous session's fixing at 6.7774 per dollar. The fixing matched market expectations, traders said, adding the spot market was balanced in morning trade. The spot yuan opened at 6.7647 per dollar and was changing hands at 6.7692 at midday, 49 pips firmer than the previous late session close but 0.19 percent weaker than the midpoint. "There was no clear direction to trade upward or downward in the market today," said a chief dealer at a foreign bank in Shanghai. The dealer added that some companies continued to purchase dollars while others showed increasing interest in liquidating their dollar positions amid recent volatility in the yuan. State-owned banks have offered dollar liquidity regularly over the past two months in what traders believe is part of official efforts to support the yuan. The yuan gained around 0.5 percent against the U.S. unit last week, but its value based on a trade-weighted basket edged down 0.2 percent to 93.34 from 93.52 a week earlier, according to official data from the China Foreign Exchange Trade System (CFETS). The CFETS publishes index figures on a weekly basis. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.25, weaker than the previous day's 94.37. The global dollar index rose to 95.177 from the previous close of 95.153. The offshore yuan was trading 0.04 percent firmer than the onshore spot at 6.7666 per dollar. 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 6.896, or 2.03 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0411 GMT:

ONSHORE SPOT:

Item Current Previous Change PBOC midpoint 6.7562 6.7774 0.31% Spot yuan 6.7692 6.7741 0.07% Divergence from 0.19%

midpoint*

Spot change YTD 2.62% Spot change since 2005 22.27%

revaluation

Key indexes:

Item Current Previous Change Thomson 94.25 94.37 -0.1

Reuters/HKEX CNH index

Dollar index 95.177 95.153 0.0

*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 6.7666 0.04% * Offshore 6.896 -2.03%

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 Richard Borsuk)