Yuan rises on broad dollar weakness, but set for second annual loss

SHANGHAI, Dec 30 (Reuters) - China's yuan rose to the highest level against the dollar in more than two weeks on Monday, after the central bank set a firmer-than-expected midpoint fixing, tracking broad weakness in the greenback in overseas markets. The dollar eased against its major trading partners on Monday morning after falling over 0.6% on Friday, as optimism about a preliminary Sino-U.S. trade deal lifted risk appetite, sapping safe-haven demand for the greenback. Still, the dragged out trade dispute and weakness in China's domestic economy have kept the yuan on course for its second straight annual loss, down around 1.6% for the year after a 5.3% decline in 2018. Prior to market opening on Monday, the People's Bank of China (PBOC) set the midpoint rate at 6.9805 per dollar, 74 pips or 0.1% firmer than the previous fix of 6.9879. Many traders said the midpoint fixing came in stronger than they had projected, lifting the yuan in the spot market. Monday's official guidance rate was 45 pips firmer than Reuters' estimate of 6.9850 per dollar. The onshore yuan opened at 6.9935 per dollar and rose to a high of 6.9811 at one point, the strongest level since Dec.13. As of midday, the spot yuan was changing hands at 6.9824 at midday, 132 pips firmer than the previous late session close. Traders said market activity continued to be light towards the end of the year, with many participants on holiday and others closing their proprietary accounts on the second to the last trading day of the year. Trading volume shrank to $8.976 billion as midday, compared with a normal half-day volume of about $15 billion. Analysts at OCBC Wing Hang Bank said the yuan continued hovering at above seven-per-dollar levels in light trading. "Optimism that China and the United States will sign the Phase 1 trade deal remained, benefiting the yuan's movements," they said in a note on Monday. The global dollar index fell to 96.784 at midday from the previous close of 96.919. The offshore yuan was trading at 6.9791 per dollar as of midday.

The yuan market at 0349 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 Winni Zhou and Brenda Goh; editing by Richard Pullin)