Wires

Yuan firms on Kudlow comment on trade deal, but set for first weekly loss in six

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SHANGHAI, Nov 15 (Reuters) - China's yuan flitted either side of the key 7 per-dollar level on Friday, supported by White House economic adviser Larry Kudlow saying negotiators were "getting close" to a preliminary trade deal to de-escalate the U.S.-China tariff war. Prior to market opening on Friday, the People's Bank of China set the midpoint rate at 7.0091 per dollar, 8 pips weaker than the previous fix of 7.0083. In the onshore market, the yuan opened at 7.0047 per dollar, and quickly strengthened to 6.9982 before settling back at 7.0081 by midday, to stand 119 pips firmer than Thursday's late session close. If the spot yuan ends the day there it will have lost 0.18% against the dollar over the week, registering its first weekly decline in six weeks. Iris Pang, Greater China economist at ING in Hong Kong said the yuan is likely to be volatile even after the "phase one" trade deal with Washington. "The yuan will weaken a lot if there is no Phase One deal and we can't rule this out even if the chance is small. On the other hand, the currency will strengthen if tariffs on $112 billion worth of goods, imposed in September, are lifted," Pang said. Separately, the PBOC unexpectedly extended 200 billion yuan through its medium-term lending facility on Friday, the second time it has done so this month, while keeping the lending rate unchanged. "Coming on the heels of dreary economic impulses, the MLF arranged by the PBOC today could very well be aimed at countering weak economic data," Stephen Innes, chief market strategist at AxiTrader said in a note. Recent high frequency data including credit growth and activity indicators have pointed toward an economic slowdown in China. The global dollar index fell to 98.147 at midday from the previous close of 98.163. The offshore yuan was trading at 7.0062 per dollar as of midday.

The yuan market at 0337 GMT:

ONSHORE SPOT:

Item Current Previous ChangePBOC midpoint 7.0091 7.0083 -0.01%Spot yuan 7.0081 7.02 0.17%Divergence from -0.01%

midpoint*

Spot change YTD -1.93%Spot change since 2005 18.10%

revaluation

Key indexes:

Item Current Previous ChangeThomson 92.38 92.31 0.1

Reuters/HKEX CNH index

Dollar index 98.147 98.163 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 7.0062 0.03%*Offshore 7.0743 -0.92%

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 John Ruwitch; Editing by Simon Cameron-Moore)