Yuan flat near week low amid trade deal, holiday hiatus

HONG KONG, Dec 20 (Reuters) - China's yuan drifted near its weakest level in a week on Friday, as investors awaited concrete details from the Sino-U.S. trade agreement and global markets wound down for the year. The onshore yuan traded flat at 7.0080 per dollar at midday, having edged to its weakest since Dec. 12 earlier in the session. Offshore yuan was little changed from the previous close at 7.0020 per dollar. The People's Bank of China set the midpoint rate at 7.002 per dollar prior to market open, near the Reuters estimate of 7.0033 per dollar. In early trading, China kept its one-year and five-year loan prime rate (LPR), a lending benchmark rate, unchanged, signaling no pressure on liquidity. "With the receding trade war risk, the PBOC left the 1Y and 5Y loan prime rate unchanged at 4.15% and 4.80%, respectively," Ken Cheung, chief Asian FX strategist at Mizuho Bank, wrote in a note on Friday. U.S. Treasury Secretary Steven Mnuchin has said that Beijing and Washington will sign their trade agreement at the beginning of January, adding that it was completely finished and just undergoing a technical "scrub." The Chinese commerce ministry said on Thursday the two sides are in close communication to seal a Phase 1 agreement but offered no further update. Neither side has released specific details of the agreement. "Importantly, the deal announcement will not be particularly timely (or) sensitive to markets as (U.S. President Donald) Trump had canceled the tariffs hike in mid-December," said Cheung. "China and the United States will unlikely produce better news (than the deal) within this year, (hence we) estimate the yuan to trade around 7 before the end of the year," said one trader with a foreign bank in Shanghai. Other traders noted that the yuan was dented by U.S. dollar strength this week. The greenback was supported by strong economic data that lowered expectations the Federal Reserve will further cut rates in 2020. The yuan would be 0.08% weaker from the previous week should it close at midday levels. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 92.01, slightly weaker than the previous day's 92.07.

The yuan market at 4:02AM GMT:




Key indexes:

Reuters/HKEX CNH index

*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.


from onshore

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 Jacqueline Wong)