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Yuan dips on corporate dollar demand, trade talks remain focus

SHANGHAI, Feb 19 (Reuters) - China's yuan eased against the U.S. dollar on Tuesday, dragged lower by rising corporate demand for the greenback, while investors anxiously await news on Sino-U.S. trade talks. A new round of talks between the United States and China to resolve their trade war will take place in Washington on Tuesday, with follow-up sessions at a higher level later in the week, the White House said on Monday. A de-escalation of the year-long trade dispute could ease some of the pressure on China's cooling economy, while failure to reach a deal and potentially higher U.S. tariffs may risk a sharper slowdown that could prompt Beijing to announce more sweeping stimulus measures. The yuan's movements were likely to be influenced in the short-term by developments in the trade talks, given there is no major Chinese economic data this week, said Bill Zhou, an analyst at China Construction Bank (Asia) in Hong Kong. "However, it still requires the leaders of the two nations to push before China and United States reach a substantive agreement," he said in a note, expecting both onshore and offshore yuan to trade in a range of 6.73 to 6.80 per dollar this week. Prior to the market opening on Tuesday, the People's Bank of China (PBOC) set the midpoint rate at 6.7642 per dollar, 17 pips firmer than the previous fix of 6.7659. In the spot market, the onshore yuan opened at 6.7750 per dollar and was changing hands at 6.7754 at midday, 79 pips weaker than the previous late session close and 0.17 percent softer than the midpoint. Several traders attributed the yuan's loss in the morning session to rising corporate dollar buying, as they see limited upward room in the local currency. "Most investors are optimistic now, but such optimism has somehow been priced in already," said a trader at a Chinese bank in Shanghai, noting that the yuan gave back some of the gains from the previous session. The global dollar index fell to 96.897 at midday from the previous close of 96.904. The offshore yuan was trading at 6.7808 per dollar as of midday.

The yuan market at 0412 GMT:


Item Current Previous ChangePBOC midpoint 6.7642 6.7659 0.03%Spot yuan 6.7754 6.7675 -0.12%Divergence from 0.17%


Spot change YTD 1.44%Spot change since 2005 22.16%


Key indexes:

Item Current Previous ChangeThomson 94.71 94.73 0.0

Reuters/HKEX CNH index

Dollar index 96.897 96.904 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 6.7808 -0.08%*Offshore 6.7875 -0.34%

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 Andrew Galbraith; Editing by Kim Coghill)