SHANGHAI, April 2 (Reuters) - The yuan dipped against a firmer U.S. dollar on Tuesday, but losses were capped by optimism over Sino-U.S. trade talks and upbeat Chinese data that suggested its ailing manufacturing sector may be starting to bottom out. The dollar rose after U.S. Treasuries yields surged overnight, with the benchmark 10-year rate rising more than 8 basis points, as encouraging manufacturing data out of the United States and China spurred some investors to scale back their holdings of safe-haven bonds. Prior to market opening on Tuesday, the People's Bank of China (PBOC) set the midpoint rate at 6.7161 per dollar, 32 pips or 0.05 percent firmer than the previous fix of 6.7193. In the spot market, onshore yuan opened at 6.7135 per dollar and was changing hands at 6.7196 at midday, 71 pips weaker than the previous late session close and 0.05 percent softer than the midpoint. Several traders said the yuan was largely tracking the dollar on Tuesday morning. "The yuan has not figured out a clear direction yet," said a trader at a foreign bank. Market participants have shifted their attention to the latest round of trade negotiations, with the Chinese trade delegation led by Vice Premier Liu He visiting Washington for talks starting on Wednesday. Both sides cited progress in discussions in Beijing last week. Ken Cheung, senior Asian FX strategist at Mizuho Bank in Hong Kong, said while optimism over the talks has held steady any further delay in a meeting between Chinese President Xi Jinping and his U.S. counterpart Donald Trump could put the yuan under pressure. An announcement of a meeting date is expected to signify a deal has been reached. "In the meantime, the combination of improving China data, hopes for government stimulus, steady RMB outlook and China equities and bond inclusion in global indices fueled foreign invertors' interest to buy RMB assets in Q2," he said in a note on Tuesday. Bill Zhou, analyst at China Construction Bank (Asia),also said hopes of a trade deal capped the downside for the yuan. He expects both onshore and offshore yuan to trade in a range of 6.6850 to 6.7450 this week. The global dollar index rose to 97.353 at midday from the previous close of 97.232. The offshore yuan was trading at 6.7255 per dollar as of midday.
The yuan market at 0400 GMT:
ONSHORE SPOT:
Item Current Previous ChangePBOC midpoint 6.7161 6.7193 0.05%Spot yuan 6.7196 6.7125 -0.11%Divergence from 0.05%
midpoint*
Spot change YTD 2.28%Spot change since 2005 23.17%
revaluation
Key indexes:
Item Current Previous ChangeThomson 95.8 95.76 0.0
Reuters/HKEX CNH index
Dollar index 97.353 97.232 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.
OFFSHORE CNH MARKET
Instrument Current Difference
from onshore
Offshore spot yuan 6.7255 -0.09%*Offshore 6.7585 -0.63%
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)