China's yuan softer as corporates continue to buy dollars

SHANGHAI, Aug 21 (Reuters) - China's yuan turned softer against the U.S. dollar on Monday even amid firmer guidance from the central bank as corporate dollar purchases remained strong. Prior to market opening, the People's Bank of China set the midpoint rate at 6.6709 per dollar, slightly firmer than the previous fix 6.6744. In the spot market, the yuan opened at 6.6670 per dollar and was changing hands at 6.6713 at midday, 34 pips weaker than the previous late session close and 0.01 percent softer than the midpoint. A bounce in the dollar in overseas markets also piled some pressure on the yuan in morning trade on Monday, traders said. The U.S. currency recovered on signs of an improving economy and as investors looked ahead to the Federal Reserve's annual central banking symposium in Jackson Hole, Wyoming later this week. A survey showed U.S. consumer sentiment climbed to a 7-month high. The dollar had stumbled against a basket of major currencies in the previous session on concerns White House personnel changes would impair President Donald Trump's ability to pass tax reform and stimulus measures. Traders said corporate dollar demand was a little heavier in morning trade to drag spot yuan rate lower as companies with financing and business needs for the greenback usually shore up their dollar positions when the month-end approaches. A trader at a Chinese bank said the market had no intention to test highs or lows in the renminbi at current levels and expected the yuan to remain range-bound in the near term. The Chinese currency finished flat against the dollar last week, but lost 0.2 percent on a trade-weighted basis against a basket of currencies of its trading partners, according to official data from the China Foreign Exchange Trade System (CFETS). The CFETS publishes index figures on a weekly basis. Analysts pointed out that latest restrictions on outbound investment issued by the state council, China's cabinet, on Friday would likely dampen domestic demand for the U.S. unit.

"This represents formalized restrictions on certain overseas investment areas, after clamping down on such activities of a few companies. This could further limit locals' USD demand," economists at Citi said in a note on Monday, suggesting falls in dollar demand would offer the yuan some relief. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.71, firmer than the previous day's 94.67. The global dollar index rose to 93.469 from the previous close of 93.434. The offshore yuan was trading -0.12 percent away from the onshore spot at 6.6796 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 6.816, -2.13 percent away from the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0358 GMT:


Item Current Previous Change PBOC midpoint 6.6709 6.6744 0.05% Spot yuan 6.6713 6.6679 -0.05% Divergence from 0.01%


Spot change YTD 4.13% Spot change since 2005 24.06%


Key indexes:

Item Current Previous Change Thomson 94.71 94.67 0.0

Reuters/HKEX CNH index

Dollar index 93.469 93.434 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.


Instrument Current Difference

from onshore

Offshore spot yuan 6.6796 -0.12% * Offshore 6.816 -2.13%

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 John Ruwitch; Editing by Jacqueline Wong)