Wires

Yuan climbs cautiously on Trump-Xi trade goodwill

HONG KONG, Nov 25 (Reuters) - The yuan firmed on Monday after the Chinese and U.S. presidents warmed to signing an initial agreement to pause their 16-month trade war, but the move was subdued by skepticism over them reaching a more substantial phase-two deal. In rare comments on the trade conflict, Chinese President Xi Jinping said Beijing wants a 'phase one' trade pact.

His comments were followed hours later by U.S. President Donald Trump saying a deal with China is "potentially very close," though adding he took issue with inking "an even deal" because the United States had suffered for years in trade imbalances with China. Given the difficulties in getting the first-stage done and with the 2020 U.S. presidential election drawing closer, U.S. and Chinese officials said an ambitious "phase two" trade deal is looking less likely. Traders say the uncertainty dampened on the positive headlines of both presidents wanting a deal. "The market is now leaning towards cautious interpretations of both sides' comments (which) will not have too big an impact on market sentiment," said one of the traders, who is based in Shanghai. The onshore yuan traded up almost 0.1% at 7.0363 per dollar at midday. The People's Bank of China set the midpoint rate at 7.0397 per dollar prior to market open, near Reuters' estimate of 7.0421. The offshore yuan was also up 0.1% at 7.0356. "Much of the phase one deal has been priced in," said Bruce Yam, a Hong Kong-based forex strategist with brokerage Everbright Sun Hung Kai. With the trade deal's progress hanging in the balance, Yam sees the yuan market returning to economic fundamentals. "The economy is still sliding. There is no basis for a massive appreciation," said Yam. Trump also remained vague on whether he will sign bills passed by U.S. lawmakers backing protesters in Hong Kong, which has angered Beijing. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 92.14, firmer than the previous day's 92.04. The global dollar index ticked up slightly to 98.281 from the previous close of 98.27.

The yuan market at 4:02AM GMT:

ONSHORE SPOT:

Item Current Previous ChangePBOC midpoint 7.0397 7.0306 -0.13%Spot yuan 7.0363 7.0405 0.06%Divergence from -0.05%

midpoint*

Spot change YTD -2.32%Spot change since 2005 17.63%

revaluation

Key indexes:

Item Current Previous ChangeThomson 92.14 92.04 0.1

Reuters/HKEX CNH index

Dollar index 98.281 98.27 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 7.0356 0.01%Offshore 7.0993 -0.84%

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 Xiao Han in Beijing. Editing by Lincoln Feast.)