China's yuan flat, corporate demand offsets dollar's broad weakness

SHANGHAI, Nov 10 (Reuters) - China's yuan on Friday barely moved against the U.S. dollar, in spite of the greenback's broad weakness, and the Chinese currency looked set to end the week flat. The dollar was on track for weekly losses after it dropped on disappointment with a tax bill put forth by U.S. Senate Republicans that would delay expected corporate tax cuts.

In China, corporate demand for the dollar offset its weakness. Prior to market opening on Friday, the People's Bank of China (PBOC) raised the yuan's official midpoint rate to 6.6282 per dollar, 43 pips or 0.06 percent firmer than Thursday's fix of 6.6325. In the spot market, the onshore yuan opened at 6.6395 per dollar and was changing hands at 6.6371 at midday, 7 pips firmer than the previous late session close. If the yuan ends Friday's late night session at that level, it would be flat against the dollar this week, after strengthening around 0.21 percent a week earlier. Traders said seasonal corporate demand for the greenback has eclipsed its weakness, which otherwise should have supported the spot yuan on Friday morning. Some oil firms and other companies routinely need dollars in the middle of a month for financing needs. Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong, said he expects the yuan to swing in a range of 6.5 to 6.7 per dollar the remainder of this year. He noted that progress of the proposed tax cut in the United States "is important for the dollar's movement, but now it seems a question mark." A Reuters poll published on Thursday suggested that the yuan is expected to weaken to 6.72 per dollar in a year's time.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.65, weaker than the previous day's 95.82. The global dollar index rose to 94.494 from the previous close of 94.444. The offshore yuan was trading 0.12 percent weaker than the onshore spot at 6.6452 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 6.795, 2.45 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0415 GMT:


Item Current Previous Change PBOC midpoint 6.6282 6.6325 0.06% Spot yuan 6.6371 6.6378 0.01% Divergence from 0.13%


Spot change YTD 4.66% Spot change since 2005 24.70%


Key indexes:

Item Current Previous Change Thomson 95.65 95.82 -0.2

Reuters/HKEX CNH index

Dollar index 94.494 94.444 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 6.6452 -0.12% * Offshore 6.795 -2.45%

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 Richard Borsuk)