Wires

Yuan retreats from highs as U.S.-China trade talks drag on

HONG KONG, Nov 7 (Reuters) - The yuan lost ground on Thursday, retreating further from this week's peak as reports China and the United States may delay a long-awaited preliminary deal sapped confidence. The Chinese currency rallied to its strongest level in three months earlier this week as Beijing and Washington appeared to progress towards sealing a "phase one" agreement to dial back a damaging 16-month long trade war. But a senior U.S. official told Reuters on Wednesday the meeting between the U.S. and Chinese presidents to sign the deal could be delayed until December as discussions continue over terms and venue. The official, who spoke on condition of anonymity, said it was still possible the partial agreement would not be reached, but a deal was more likely than not. The onshore yuan softened 0.3% to 7.0188 per dollar by midday, and off its peak of 6.9880 reached Monday, while the offshore yuan was off by 0.1% at 7.0194. Prior to the open, the People's Bank of China set the guidance rate at its strongest since August 7 at 7.0008 and close to Reuters' estimate of 7.0044. Onshore yuan can trade 2% either side of this midpoint. A Shanghai-based trader with a foreign bank said while the market still expects a deal to be sealed, short-term sentiment is likely to be dented on any delays. "The plot of this drama (trade talks) has all sorts of twists and turns, nothing is for certain until the last moment," said another trader at a Chinese bank in Shanghai. A Reuters poll of currency strategists on Thursday suggested that the yuan will give up its recent gains and weaken about 2% in six months, in the absence of a broader deal rolling back existing tariffs imposed on China. "China's desire to roll back more U.S. tariffs is likely to require more time to negotiate terms," analysts at DBS wrote in a note on Thursday. "Until we get more clarity on the venue and U.S. position on China's tariff request, look for Emerging Asian currencies and the Australian dollar to give back some of the gains chalked in October," they said. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 92.09, weaker than the previous day's 92.19.

The yuan market at 4:00AM GMT:

ONSHORE SPOT:

Item Current Previous ChangePBOC midpoint 7.0008 7.008 0.10%Spot yuan 7.0188 6.9978 -0.30%Divergence from 0.26%

midpoint*

Spot change YTD -2.08%Spot change since 2005 17.92%

revaluation

Key indexes:

Item Current Previous ChangeThomson 92.09 92.19 -0.1

Reuters/HKEX CNH index

Dollar index 97.988 97.952 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 7.0194 -0.01%*Offshore 7.0814 -1.14%

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; Additional reporting by Jindong Zhang in Shanghai Editing by Shri Navaratnam)