China's yuan jumps as Sino-U.S. trade call eases tensions

Credit: REUTERS/© Kim Kyung Hoon / Reuters

China's yuan strengthened on Tuesday, with its offshore variant firming to within a whisker of 6.9 per dollar, after senior U.S. and Chinese officials expressed optimism over resolving issues around their Phase 1 trade deal.

SHANGHAI, Aug 25 (Reuters) - China's yuan strengthened on Tuesday, with its offshore variant firming to within a whisker of 6.9 per dollar, after senior U.S. and Chinese officials expressed optimism over resolving issues around their Phase 1 trade deal.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke with Chinese Vice Premier Liu He in a "regularly scheduled call" on Monday, USTR said in a statement, adding that both sides "see progress" in implementing the Sino-U.S. trade deal.

The offshore yuan CNH=D3 rose to a high of 6.9007 per dollar on the news before pulling back. At midday in China, the currency stood at 6.9080, 61 pips firmer than Monday's close.

Onshore spot yuan CNY=CFXS opened at 6.9099 per dollar and climbed to a peak of 6.9072 in the morning session. It was trading at 6.9120 per dollar at midday, firming 70 pips from Monday's late session close.

The People's Bank of China had set the onshore yuan's daily midpoint fixing CNY=PBOC at 6.9183 per dollar on Tuesday, firmer than Monday's 6.9194.

"Having contact is always a good thing, but (Monday's) call did not exceed market expectations so it doesn't count as a major positive factor. Looking at the market's reaction things are relatively normal," said a trader at a Chinese bank.

A review of the trade agreement had originally been scheduled for Aug. 15 but had been delayed, fuelling some concerns the deal could be ditched amid growing Sino-U.S. tensions in recent months.

Both offshore and onshore yuan CNY=CFXS remained shy of the seven-month highs they hit against the greenback on Friday. The yuan has benefited in recent weeks from a recovering domestic economy and investor inflows into China's stock and bond markets.

In China's interbank bond market, news of the call between U.S. and Chinese trade officials helped boost risk appetite, pushing treasury futures down sharply and boosting the yield on benchmark 10-year government bonds above 3%.

The yuan market at 4:00AM GMT:

ONSHORE SPOT:

Item

Current

Previous

Change

PBOC midpoint CNY=SAEC

6.9183

6.9194

0.02%

Spot yuan CNY=CFXS

6.912

6.919

0.10%

Divergence from midpoint*

-0.09%

Spot change YTD

0.74%

Spot change since 2005 revaluation

19.74%

Key indexes:

Item

Current

Previous

Change

Thomson Reuters/HKEX CNH index

92.52

92.51

0.0

Dollar index

93.172

93.276

-0.1

*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% from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

Instrument

Current

Difference from onshore

Offshore spot yuan CNH= *

6.908

0.06%

Offshore non-deliverable forwards CNY1YNDFOR= **

7.0615

-2.03%

*Premium for offshore spot over onshore CNY=CFXS

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. CNY=SAEC.

(Reporting by Andrew Galbraith and Jindong Zhang; Editing by Jacqueline Wong)

((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging: andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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