China's yuan firms as trade row fears calm, Q1 trade surplus with U.S. jumps

SHANGHAI, April 13 (Reuters) - China's yuan firmed on Friday, as newly-released data showed the country's trade surplus with the United States soared in the first quarter despite an unexpected fall in March exports. As President Xi Jinping pledged to further open China's markets, investors are growing optimistic that a full-blown trade war between Beijing and Washington could be avoided, while a sharp depreciation in the yuan, or renminbi, is unlikely. "In our view, Chinese authorities are unlikely to use renminbi devaluation as a retaliatory measure and are instead likely reminding the U.S. that they have this tool available," wrote J.P. Morgan Asset Management Global Market Strategist Hannah Anderson. The People's Bank of China set the midpoint rate at 6.2898 per dollar prior to market open, weaker than the previous fix 6.2834. The spot market opened at 6.2899 per dollar and was changing hands at 6.2912 at 0525 GMT. The offshore yuan (CNH) was trading at 6.2889 per dollar, weaker than the previous day's unofficial close of 6.277. China's exports growth unexpectedly fell in March, data showed on Friday, the first drop since February last year, but March import growth beat expectations. That left China with a rare trade deficit for the month, also the first drop since last February. Still, China's quarterly trade surplus with the United States surged 19.4 percent to $58.25 billion. "We anticipate the renminbi will remain on the Treasury's watch list, given China still meets their criteria on current account surplus and market intervention," J.P. Morgan's Anderson said. "The upcoming U.S. Treasury report on currency manipulation is likely to add to volatility, but is unlikely to represent a significant shift in U.S. policy." The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 97.86, weaker than the previous day's 97.89. The global dollar index rose to 89.777 from the previous close of 89.751. The offshore yuan was trading 0.06 percent away from the onshore spot at 6.288 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 6.383, -1.46 percent away from the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 5:07AM GMT:


Item Current Previous Change PBOC midpoint 6.2898 6.2834 -0.10% Spot yuan 6.2915 6.2922 0.01% Divergence from 0.03%


Spot change YTD 3.42% Spot change since 2005 31.55%


Key indexes:

Item Current Previous Change Thomson 97.86 97.89 0.0

Reuters/HKEX CNH index

Dollar index 89.777 89.751 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.


Instrument Current Difference

from onshore

Offshore spot yuan 6.288 0.06% * Offshore 6.383 -1.46%

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 Samuel Shen and John Ruwitch Editing by Jacqueline Wong)