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China's yuan eases on dollar demand, set for losing week

SHANGHAI, Dec 1 (Reuters) - China's yuan eased against the U.S. dollar on Friday, pressured by a weaker official fixing and rising seasonal corporate demand for the greenback. The Chinese currency has registered a second straight winning month in November, but looks set for a losing week. The dollar was steady against its major trading partners on Friday morning as the market remained anxiously awaiting a final vote on a U.S. tax reform bill. Prior to market opening on Friday, the People's Bank of China set the midpoint rate at 6.6067 per dollar, 33 pips or 0.05 percent weaker than the previous fix of 6.6034. Multiple traders said Friday's official yuan midpoint came in weaker than their models had suggested. In the spot market, the onshore yuan opened at 6.6080 per dollar and was changing hands at 6.6150 at midday, 60 pips weaker than the previous late session close and 0.13 percent softer than the midpoint. If the yuan ends the late night session at the midday level, it would have lost 0.18 percent against the dollar for the week - the worst since late October. The yuan strengthened around 0.39 percent last week. Traders said corporate dollar demand dragged the yuan lower on Friday morning. Households and companies usually have rising demand for dollars ahead of the year-end. A trader at a Chinese bank said domestic market participants had not reached a consensus on the yuan's movement in the near term. And that could lead the Chinese currency trapped in a narrow range. The onshore yuan has strengthened around 0.38 percent on the dollar in November, but eased about 0.56 percent on a trade-weighted basis against a basket of currencies of trading partners in the same period, the China Foreign Exchange Trade System (CFETS) said in a statement on its website on Friday. A trader at another Chinese bank said the losses in the yuan's value against the basket was a result of the volatile Korean won last month. A Reuters poll of 12 analysts, traders and fund managers conducted on Wednesday suggested that investors had increased their long positions in the Chinese currency to the highest level since late September. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.06, weaker than the previous day's 95.14. The global dollar index fell to 92.962 from the previous close of 93.047. The offshore yuan was trading 0.02 percent weaker than the onshore spot at 6.6165 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 6.773, 2.46 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0421 GMT:

ONSHORE SPOT:

Item Current Previous Change PBOC midpoint 6.6067 6.6034 -0.05% Spot yuan 6.615 6.609 -0.09% Divergence from 0.13%

midpoint*

Spot change YTD 5.01% Spot change since 2005 25.12%

revaluation

Key indexes:

Item Current Previous Change Thomson 95.06 95.14 -0.1

Reuters/HKEX CNH index

Dollar index 92.962 93.047 -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 6.6165 -0.02% * Offshore 6.773 -2.46%

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)