Wires

Yuan snaps 6-day winning streak ahead of trade deal signing

SHANGHAI, Jan 15 (Reuters) - China's yuan slipped against the dollar on Wednesday, snapping a six-day winning streak, as investors took profit ahead of the signing of the long-awaited Sino-U.S. Phase 1 trade deal. Market sentiment was slightly dented after U.S. Treasury Secretary Steven Mnuchin said on Tuesday the United States would keep in place tariffs on Chinese goods until the completion of a second phase of a U.S.-China trade agreement. Prior to market opening, the People's Bank of China (PBOC) lifted its official midpoint for the fourth straight day to 6.8845 per dollar, 109 pips or 0.16% firmer than the previous fix of 6.8954 and the strongest since July 31, 2019. In the spot market, onshore yuan opened at 6.8910 per dollar and was changing hands at 6.8950 at midday, 105 pips weaker than the previous late session close. Onshore spot yuan consolidated in a tight range of less than 80 pips in morning trade. It had surged to a six-month high in volatile trade over the past two sessions after the United States dropped its designation of China as a currency manipulator. A trader at a foreign bank said the market was a little irrational and oversold dollars in the previous session and he now expects the yuan to trade in a wide range of 6.87 to 6.92 per dollar in the near term. The Phase 1 trade deal will be signed in Washington later on Wednesday. "Going forward, further RMB appreciation will be predicated on continued improvement in the macro outlook," analysts at OCBC Bank said in a note. There have been recent signs of stabilisation in the world's second-largest economy, but China's economy is still expected to post the slowest growth in 30 years in 2020 as domestic and global demand remain sluggish, a Reuters poll showed this week.

The government is due to publish fourth-quarter economic data on Friday at 10:00 am (0200 GMT). Earlier in the session, the PBOC extended fresh short- and medium-term loans but kept the borrowing cost unchanged, as it seeks to maintain adequate liquidity in a slowing economy and ease a potential crunch ahead of the Lunar New Year.

The global dollar index fell to 97.361 at midday from the previous close of 97.372. The offshore yuan was trading at 6.8985 per dollar as of midday.

The yuan market at 0420 GMT:

ONSHORE SPOT:

Item Current Previous ChangePBOC midpoint 6.8845 6.8954 0.16%Spot yuan 6.895 6.8845 -0.15%Divergence from 0.15%

midpoint*

Spot change YTD 0.99%Spot change since 2005 20.04%

revaluation

Key indexes:

Item Current Previous ChangeThomson 93.27 93.43 -0.2

Reuters/HKEX CNH index

Dollar index 97.361 97.372 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 6.8985 -0.05%*Offshore 6.9725 -1.26%

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 Andrew Galbraith; Editing by Jacqueline Wong)