China's yuan stabilises, seen rangebound for now

SHANGHAI, March 28 (Reuters) - China's yuan stabilised against the U.S. dollar on Wednesday after a roller-coaster run a day earlier, with the greenback stalled in global markets as lingering global trade tensions curb its capacity to bounce back. The Chinese currency swung in a wide range on Tuesday, surging to its highest level since a one-off devaluation in August 2015 before giving back most of its gains at the late night close. However, the yuan was still on course for its fifth straight quarterly gain against the dollar, its longest winning streak since 2013. The global dollar index, a gauge of the greenback's strength against six other major currencies, stood at 89.27 at midday compared with its late night close of 89.372. Prior to market open, the People's Bank of China (PBOC) set its official yuan midpoint at 6.2785 per dollar, 31 pips or 0.05 percent firmer than Tuesday's fix of 6.2785. In the spot market, the onshore yuan opened at 6.2697 per dollar and was changing hands at 6.2777 at midday, only 2 pips weaker than the previous late session close. Market sentiment was largely stable on Wednesday morning, traders said, noting that the yuan's fundamentals had not changed and they expected the yuan to remain rangebound in the near term. The onshore spot yuan rate has been stagnant between 6.3 and 6.36 per dollar in the past two months, although a trader at a Chinese bank expects to see a new range of 6.25 to 6.29 per dollar for the yuan. "The upward pressure on the yuan remained strong ... as investors still hold bearish views on the dollar," the trader said. Traders also speculated whether the Trump administration would press China for currency reassurances as part of the trade negotiations, like those secured from South Korea overnight.

Traders and analysts have revised their forecasts for the yuan following the recent volatility, but the market has not reached a consensus. Capital Economics expects the yuan to slip to around 6.4 per dollar by the end of this year before rising again to 6.2 by the end of 2019, while ANZ economists said they expect the yuan to end this year at 6.25 per dollar. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 97.65, weaker than the previous day's 97.82. The offshore yuan was trading 0.19 percent firmer than the onshore spot at 6.2661 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 6.3661, 1.38 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 0343 GMT:


Item Current Previous Change PBOC midpoint 6.2785 6.2816 0.05% Spot yuan 6.2777 6.2775 0.00% Divergence from -0.01%


Spot change YTD 3.65% Spot change since 2005 31.84%


Key indexes:

Item Current Previous Change Thomson 97.65 97.82 -0.2

Reuters/HKEX CNH index

Dollar index 89.27 89.372 -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 6.2661 0.19% * Offshore 6.3661 -1.38%

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 Eric Meijer)