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China's yuan firms, midpoint rises most in over a month

SHANGHAI, Nov 15 (Reuters) - China's yuan edged higher against the U.S. dollar on Wednesday, after the central bank raised its midpoint by the most in more than a month, following a slide in the greenback in global markets. The dollar slipped against a basket of currencies, as the euro rallied following strong economic growth in Germany in the third quarter. Prior to market opening on Wednesday, the People's Bank of China set its midpoint at 6.6263 per dollar, 136 pips or 0.21 percent firmer than the previous fix of 6.6399 on Tuesday. The move in the official fixing was the biggest one-day strengthening in percentage terms since Oct. 11. The firmer guidance pushed spot yuan higher. The onshore yuan opened at 6.6336 per dollar and was changing hands at 6.6321 at midday, 45 pips firmer than the previous late session close but 0.09 percent weaker than the midpoint. Traders said corporate demand for dollars was subdued while their willingness to sell the greenback was dampened on Wednesday morning as a result of the higher fixing. A Shanghai-based trader at a Chinese bank who expects onshore yuan to trade in a range of 6.61 to 6.68 per dollar for the remainder of this year, said market participants' proprietary trade "remained cautious" on Wednesday. Alicia Garcia Herrero, chief economist at Natixis, said she expected the yuan to face "moderate depreciation pressure in the coming months". "On the one hand, the recent good news about the U.S. economy and the Federal Reserve's expected hike could fuel a stronger greenback, with renewed downward pressure for RMB," she said in a note, adding the PBOC would not allow a strong depreciation. Official data showed late on Tuesday that China's central bank purchased a net 2.1 billion yuan ($316.7 million) worth of foreign exchange last month, indicating modest capital inflows due to tighter regulations and a stronger yuan. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.59, weaker than the previous day's 95.71. The global dollar index fell to 93.812 from the previous close of 93.827. The offshore yuan was trading 0.06 percent weaker than the onshore spot at 6.6364 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 6.784, 2.32 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0408 GMT:

ONSHORE SPOT:

Item Current Previous Change PBOC midpoint 6.6263 6.6399 0.21% Spot yuan 6.6321 6.6366 0.07% Divergence from 0.09%

midpoint*

Spot change YTD 4.74% Spot change since 2005 24.79%

revaluation

Key indexes:

Item Current Previous Change Thomson 95.59 95.71 -0.1

Reuters/HKEX CNH index

Dollar index 93.812 93.827 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 6.6364 -0.06% * Offshore 6.784 -2.32%

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. .

($1 = 6.6309 Chinese yuan)

(Reporting by Winni Zhou and John Ruwitch; Editing by Jacqueline Wong)