SHANGHAI, Oct 30 (Reuters) - China's yuan inched up marginally on Wednesday as investors awaited the outcome of a U.S. Federal Reserve policy meeting and more information on how Sino-U.S. trade negotiations are going.
The trade dispute and the chance for at least a partial resolution continues to be the most followed issue in the currency market.
Investors became cautious and sentiment was slightly dented after a Reuters report quoted a U.S. administration official saying an interim trade agreement might not be completed in time for signing in Chile next month as expected but that does not mean the accord is falling apart.
In the spot market, onshore spot yuan CNY=CFXS opened at 7.0655 per dollar and was changing hands at 7.0650 at midday, 6 pips firmer than the previous late session close.
Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at a two-month high of 7.0582 per dollar, 35 pips firmer than Tuesday's fix of 7.0617.
Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong, said the Chinese currency has turned more sensitive to the dollar index before investors could get a clearer picture of whether November will bring a trade deal.
"China's stance on the trade war after the 4th Plenum session of the party's 19th Central Committee will be closely watched," Cheung said in a note.
"Such circumstance created a blackout period of CNH/CNY immune to trade talks headlines."
The closed-door meeting of top Communist Party officials to map out priorities for the year ahead opened on Monday and will end on Thursday.
Some domestic currency traders also noted out that China often looks to steady the yuan during major domestic events.
Trading in the options market suggested that the yuan was unlikely to show a clear direction soon. The one-month contract of the implied volatility CNY1MO=, which gauges investors' expectations for swings in the dollar against the yuan in a month of time, eased to the lowest level since Aug.2.
The global dollar index .DXY rose to 97.713 at midday from the previous close of 97.69.
The offshore yuan CNH=D3 was trading at 7.0651 per dollar.
The yuan market at 0343 GMT:
PBOC midpoint CNY=SAEC
Spot yuan CNY=CFXS
Divergence from midpoint*
Spot change YTD
Spot change since 2005 revaluation
Thomson 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.
OFFSHORE CNH MARKET
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