Yuan weakens vs dollar as China's booming exports add to trade war worries

SHANGHAI/HONG KONG, Oct 12 (Reuters) - China's onshore yuan currency weakened against the dollar on Friday morning as unexpectedly strong China exports data renewed anxiety over the Sino-U.S. trade war. The weakness followed a jump in late trading on Thursday, spurred by news that Washington will not accuse Beijing of currency manipulation - seen as a sign of easing tensions.

The People's Bank of China (PBoC) set the yuan mid-point at 6.9120, the weakest fixing since March 10, 2017 prior to trade on Friday. Spot yuan opened at 6.8997 per dollar and was changing hands at 6.9010 at midday, 122 pips weaker than the previous late session close. The yuan posted its biggest gain against the greenback in seven weeks on Thursday after reports U.S. Treasury Department staff had advised Secretary Steven Mnuchin that China was not manipulating the yuan - welcome news as the Trump administration prepares a closely watched report on foreign currencies. But China reported on Friday an unexpected acceleration in export growth in September and a record trade surplus with the United States, fanning concerns the already-heated trade spat could get uglier. Even though the Wall Street equity sell-off helped soften the greenback, "it still makes sense to be long dollars," a Hong Kong-based trader said on Friday. "The headlines will keep coming in. It is not going to be easy for China to make big concessions ...The trade dispute is going to take a long time to resolve." Capital Economics wrote: "the big picture is Chinese exports have so far held up well in the face of escalating trade tensions and cooling global growth, most likely thanks to the competitiveness boost provided by a weaker renminbi." But analysts warn that there's a limit for China to use currency depreciation to cushion the impact from trade tussles, with signs China is starting to constrict capital outflows to control of pace of yuan declines. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 92.95, firmer than the previous day's 92.82. The global dollar index fell to 94.994 from the previous close of 95.017. The offshore yuan was trading at 6.9012 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 6.988, 1.09 percent away from the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 4:18AM GMT:

ONSHORE SPOT:

Item Current Previous Change PBOC midpoint 6.912 6.9098 -0.03% Spot yuan 6.901 6.8888 -0.18% Divergence from -0.16%

midpoint*

Spot change YTD -5.71% Spot change since 2005 19.93%

revaluation

Key indexes:

Item Current Previous Change Thomson 92.95 92.82 0.1

Reuters/HKEX CNH index

Dollar index 94.994 95.017 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 6.9007 0.00% * Offshore 6.988 -1.09%

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 Noah Sin; editing by Eric Meijer)