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HONG KONG, Sept 11 (Reuters) - The yuan traded flat on Wednesday even as mixed signals over upcoming U.S.-China trade talks raised concerns and recent strength in the Chinese currency spurred buying of dollars. Peter Navarro, a senior White House adviser, cooled expectations on Tuesday for the next rounds of U.S.-China trade talks, urging investors, businesses and the public to be patient about resolving the protracted trade dispute. U.S. Treasury Secretary Steven Mnuchin just a day earlier raised the prospect of a deal with China, while the South China Morning Post reported on Tuesday that Beijing may buy more U.S. goods to get a deal with Washington, citing an anonymous source. The Global Times, a state-run newspaper, said on Tuesday that China will roll out support measures to ease the pain of the trade war, benefitting both U.S. and Chinese companies, citing an unnamed source. Chinese trade officials are expected to meet with their U.S. counterparts in mid-September in Washington before minister-level meetings in early October in the U.S. capital.
Spot yuan changed hands at 7.1159 per dollar at midday, just 0.04% softer than the previous late session close. The offshore yuan was trading just 0.01 percent firmer than the onshore spot at 7.115 per dollar. While the market's focus will stay on the U.S.-China trade war, traders said investors seizing on recent yuan strength to buy dollars may add pressure on the yuan in the short run. One trader in Shanghai said the onshore yuan is now drawing closer to the People's Bank of China's midpoint guidance rate, meaning there is less room to appreciate from here onward. "This is a good point for clients to buy (dollars)," said the trader. The central bank set the midpoint at 7.0843 on Wednesday, just a touch stronger than Reuters' estimate of 7.087. Spot yuan is allowed to trade 2% on either side of this point. Another trader said the yuan will likely trade between 7.1 and 7.15, but could swing out of this band should big banks stop buying dollars. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 91.28, weaker than the previous day's 91.47. The global dollar index rose to 98.351 from the previous close of 98.326. 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 7.1735, 1.24 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.
The yuan market at 0402 GMT:
Item Current Previous ChangePBOC midpoint 7.0843 7.0846 0.00%Spot yuan 7.1159 7.113 -0.04%Divergence from 0.45%
Spot change YTD -3.41%Spot change since 2005 16.31%
Item Current Previous ChangeThomson 91.28 91.47 -0.2
Reuters/HKEX CNH index
Dollar index 98.351 98.326 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
Offshore spot yuan 7.115 0.01%*Offshore 7.1735 -1.24%
*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 Noah Sin; Additional reporting by Jindong Zhang in Shanghai Editing by Jacqueline Wong)