Yuan inches up as traders look to Fed, Trump for dollar cues

SHANGHAI, Nov 1 (Reuters) - China's yuan firmed against the U.S. dollar on Wednesday as companies continued to sell the greenback, but many players were sidelined awaiting more clues from the Federal Reserve which could set the tone for global currencies in coming months. The dollar has backpedalled against the yuan and most other currencies this week on growing expectations that President Donald Trump will appoint Fed Governor Jerome Powell as the next head of the U.S. central bank on Thursday. Powell is seen as more dovish on interest rates. The speculation has upstaged the start of a two-day Fed policy meeting ending on Wednesday. No policy changes are expected, but it could reinforce expectations that it will raise rates again in December. Prior to the market opening on Wednesday, the People's Bank of China raised its official midpoint rate to 6.6300 per dollar, 97 pips or 0.15 percent firmer than the previous fix of 6.6397. It was the biggest one-day strengthening in the guidance rate in percentage terms since Oct. 11, but traders said it was line with their forecasts. In the spot market, the yuan opened at 6.6360 per dollar and was changing hands at 6.6228 at midday, 112 pips firmer than the previous late session close and 0.11 percent stronger than the midpoint. The Chinese currency strengthened around 0.3 percent against the U.S. dollar in October, following a loss of around 1 percent in September, which was the biggest monthly loss since November 2016. The announcement of the new Fed chair would likely spur some volatility in the dollar and the yuan, said one trader at a Chinese bank in Shanghai. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.95, firmer than the previous day's 95.92. The global dollar index rose to 94.68 from the previous close of 94.552. The offshore yuan was trading 0.07 percent firmer than the onshore spot at 6.6274 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 6.772, 2.10 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0401 GMT:


Item Current Previous Change PBOC midpoint 6.63 6.6397 0.15% Spot yuan 6.6228 6.634 0.17% Divergence from -0.11%


Spot change YTD 4.89% Spot change since 2005 24.97%


Key indexes:

Item Current Previous Change Thomson 95.95 95.92 0.0

Reuters/HKEX CNH index

Dollar index 94.68 94.552 0.1

*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 6.6274 -0.07% * Offshore 6.772 -2.10%

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 Kim Coghill)