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China's yuan eases on weaker fix and dollar strength

SHANGHAI, Nov 21 (Reuters) - China's yuan eased slightly against the U.S. dollar on Tuesday, following a weaker official midpoint and strength in the greenback. On Tuesday morning, the dollar retreated slightly but it remained close to its one-week high against a basket of currencies, as the euro continued to be weighed down by political uncertainty in Germany. Prior to market opening on Tuesday, the People's Bank of China set the day's midpoint rate at 6.6356 per dollar, 85 pips or 0.13 percent weaker than the previous fix of 6.6271. The onshore yuan opened at 6.6400 per dollar and was changing hands at 6.6356 at midday, 56 pips weaker than the previous late session close and unchanged from the midpoint. Traders said spot yuan edged lower on the strength of the dollar. A trader at a foreign bank in Shanghai said there was no clear direction for the yuan on Tuesday, and many market participants followed the dollar's movements overseas. Domestic traders say the market has already factored in that the Federal Reserve will hike U.S. interest rates next month. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.27, firmer than the previous day's 95.24. The global dollar index slipped to 94.037 from the previous close of 94.08. The offshore yuan was trading 0.10 percent weaker than the onshore spot at 6.6425 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 6.7935, 2.32 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0350 GMT:

ONSHORE SPOT:

Item Current Previous Change PBOC midpoint 6.6356 6.6271 -0.13% Spot yuan 6.6356 6.63 -0.08% Divergence from 0.00%

midpoint*

Spot change YTD 4.69% Spot change since 2005 24.73%

revaluation

Key indexes:

Item Current Previous Change Thomson 95.27 95.24 0.0

Reuters/HKEX CNH index

Dollar index 94.037 94.08 -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.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.6425 -0.10% * Offshore 6.7935 -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. .

(Reporting by Winni Zhou and John Ruwitch; Editing by Richard Borsuk)