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Yuan weakens on reports China may revive outbound investment schemes

SHANGHAI, April 12 (Reuters) - China's yuan weakened slightly on Thursday on reports that Beijing may be reviving outbound investment schemes after a three-year hiatus, raising the likelihood of more capital outflows. The People's Bank of China set the midpoint rate at 6.2834 per dollar prior to the market open, firmer than the previous fix of 6.2911. But in spot market trade the yuan opened at 6.2739 and was changing hands at 6.2786 at midday. China's foreign exchange regulator has invited financial institutions to seek new quotas under its Qualified Domestic Institutional Investor (QDII) scheme, the Securities Times reported on Thursday. Meanwhile, respected Chinese magazine Caixin reported that the State Administration of Foreign Exchange (SAFE) is also considering issuing new quotas under Qualified Domestic Limited Partnership (QDLP), another outbound investment scheme. Both schemes were unofficially suspended in late 2015, when China tightened capital controls in a bid to stem sustained outflows that were adding to downward pressure on the yuan. With the yuan and China's economy in much better shape, traders had expected some modest loosening of capital controls this year, though a recent flare-up in trade tensions with the United States raised questions over whether would loosen its grip so soon. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 98, firmer than the previous day's 97.92. The global dollar index rose to 89.598 from the previous close of 89.568. The offshore yuan was trading 0.04 percent away from the onshore spot at 6.2761 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 6.3705, -1.37 percent away from the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 4:52AM GMT:

ONSHORE SPOT:

Item Current Previous Change PBOC midpoint 6.2834 6.2911 0.12% Spot yuan 6.2786 6.2662 -0.20% Divergence from -0.08%

midpoint*

Spot change YTD 3.64% Spot change since 2005 31.82%

revaluation

Key indexes:

Item Current Previous Change Thomson 98 97.92 0.1

Reuters/HKEX CNH index

Dollar index 89.598 89.568 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 6.2761 0.04% * Offshore 6.3705 -1.37%

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 Samuel Shen and John Ruwitch; Editing by Kim Coghill)