China's offshore yuan slips after Trump backs Hong Kong protesters

SHANGHAI, Nov 28 (Reuters) - China's offshore yuan eased on Thursday, defying the central bank's firmer market guidance as investors worried about the impact of Hong Kong tensions on Sino-U.S. trade negotiations. U.S. President Donald Trump on Wednesday signed into law legislation backing protesters in Hong Kong despite angry objections from Beijing, with whom Washington is seeking to end a damaging trade war. The legislation requires the U.S. State Department to certify that Hong Kong retains enough autonomy to justify favorable U.S. trading terms that have helped the territory grow as a world financial center. It also threatens sanctions for human rights violations. In response, China warned it would take "firm counter measures" in response to the U.S. legislation and said attempts to interfere in the former British colony were doomed to fail.

A trader at a foreign bank said while Trump's signing of the bills was expected, the market's main concern is what impact it would have on trade negotiations. Prior to market open, the People's Bank of China set the midpoint rate at a one-week high of 7.0271 per dollar, firmer than the previous fix of 7.0349. The offshore yuan was trading at 7.0260 as of midday, 101 pips weaker than the previous close of 7.0165. In the spot market, onshore yuan opened at 7.0290 per dollar and was changing hands at 7.0277 at midday, little changed from the previous late session close. Ken Cheung, chief Asian FX strategist at Mizuho Bank, said in a report the modest onshore yuan reaction reflected investors' expectation that the U.S. law would not derail China-US trade talks from the time being. The global dollar index fell to 98.349 from the previous close of 98.37.

The yuan market at 4:20AM GMT:


Item Current Previous ChangePBOC midpoint 7.0271 7.0349 0.11%Spot yuan 7.0277 7.0279 0.00%Divergence from 0.01%


Spot change YTD -2.20%Spot change since 2005 17.77%


Key indexes:

Item Current Previous ChangeThomson 92.44 92.42 0.0

Reuters/HKEX CNH index

Dollar index 98.349 98.37 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.


Instrument Current Difference

from onshore

Offshore spot yuan 7.0266 0.02%*Offshore 7.0935 -0.94%

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 Luoyan Liu and John Ruwitch; Editing by Sam Holmes)