×

China's yuan rises to strongest in over a year on firmer guidance

SHANGHAI, Aug 28 (Reuters) - China's yuan climbed to its strongest against the U.S. dollar in more than a year on Monday, after the central bank raised its official guidance following a slide in the greenback. The country's stock market also rallied on Monday morning, with Shanghai's benchmark index trading above the psychologically key 3,300-point mark for a second day, triggering some to call it the start of a bull market. The People's Bank of China raised its official yuan midpoint to 6.6353 per dollar, the strongest since Aug. 19, 2016, reflecting broad weakness in the U.S. currency in global markets. Monday's midpoint was 226 pips or 0.34 percent firmer than the previous fix of 6.6579 set on Friday. The strength in the midpoint followed losses in the dollar late on Friday after Federal Reserve Chair Janet Yellen made no reference to U.S. monetary policy in her speech at the annual central bank conference in Jackson Hole, Wyoming, disappointing investors. Spot yuan opened at 6.6415 per dollar and was changing hands at 6.6416 by midday, 68 pips firmer than the previous late session close but 0.09 percent weaker than the midpoint. Traders said corporates scooped up the less expensive dollar in morning trade. "Dollar demand by companies has been strong recently," said a trader at an Asian bank in Shanghai. "The spot yuan rate strengthened, but not as much as how the midpoint suggested," the trader added, noting heavy dollar buying by companies capped gains in the Chinese currency. The Chinese currency rose by 0.3 percent against the dollar last week, but lost 0.06 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 index stood at 93.760 last Friday. 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 94.75, weaker than the previous day's 94.88. The global dollar index fell to 92.519 from the previous close of 92.74. Offshore yuan was trading 0.06 percent firmer than the onshore spot at 6.6377 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 6.7855, 2.21 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 6.6353 6.6579 0.34% Spot yuan 6.6416 6.6484 0.10% Divergence from 0.09%

midpoint*

Spot change YTD 4.59% Spot change since 2005 24.62%

revaluation

Key indexes:

Item Current Previous Change Thomson 94.75 94.88 -0.1

Reuters/HKEX CNH index

Dollar index 92.519 92.74 -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 6.6377 0.06% * Offshore 6.7855 -2.21%

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)