Wires

Yuan drifts near 2-week low after mixed signals on U.S-China trade

HONG KONG, Sept 23 (Reuters) - China's yuan dropped to its weakest level in almost two weeks on Monday as mixed signals on U.S.-China trade relations emerged as deputy-level talks ended in Washington. The U.S. Trade Representative's office called the talks ahead of high-level ones in mid-October "productive" and China said they were "constructive." But Chinese officials canceled a trip to visit U.S. farmers next week to return to China sooner than originally scheduled. President Donald Trump said the United States is "making a lot of progress" with China, but also said he did not need a deal between 2020 election, and warned that purchases of farm goods would not be enough to halt U.S. tariffs. The onshore yuan fell 0.3% to 7.1135 per dollar by midday, its weakest level since Sept. 11. The offshore yuan, which digested the trade war headlines over the weekend, was firmer by 0.13% at 7.1111 per dollar, but pared earlier gains. The People's Bank of China set the guidance rate at 7.0734 per dollar prior to market open, stronger than Reuters' estimate of 7.0828. Onshore yuan can trade 2% either side of the this midpoint. "Trump's attitude is still constantly changing, keeping the pressure (on Beijing). The outlook for the negotiations is not optimistic," said a trader at a foreign bank in Shanghai. Beijing will likely keep the yuan stable around its 70th National Day on Oct. 1, said a second trader in Shanghai, who sees the yuan trading between 7.0-7.2 ahead of the anniversary. "The midpoint shows that they (regulators) do not want to see large volatility in the renminbi. It is a message to the market," he said. Longer term, the yuan should be supported as interest rates fall across the world, said analysts at ICBC International. "The global rate cut trend is driving a hunger for asset(s), which sustains the international capital flow to China market and consequently further eases renminbi depreciation pressure," they said in a note on Monday. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 91.39, slightly weaker than the previous day's 91.63. The global dollar index was a touch softer at 98.46, from the previous close of 98.513.

The yuan market at 4:00AM GMT:

ONSHORE SPOT:

Item Current Previous ChangePBOC midpoint 7.0734 7.073 -0.01%Spot yuan 7.1135 7.0915 -0.31%Divergence from 0.57%

midpoint*

Spot change YTD -3.38%Spot change since 2005 16.35%

revaluation

Key indexes:

Item Current Previous ChangeThomson 91.39 91.63 -0.3

Reuters/HKEX CNH index

Dollar index 98.46 98.513 -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 7.1111 0.03%*Offshore 7.17 -1.35%

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 Noah Sin; Editing by Richard Borsuk)