Yuan slips as global economic risks drive dollar higher

SHANGHAI, Sept 24 (Reuters) - China's yuan eased against the dollar on Thursday, as concerns about the global economy supported a safe-haven rally in the greenback against most Asian currencies.

The dollar held its broader gains on Thursday as signs of an economic slowdown in Europe and in the United States revived concerns about the fallout from a second wave of coronavirus infections.

Analysts said warnings against a rapid rise in the Chinese currency also helped check recent gains.

"I would expect the renminbi to weaken as it's too strong now which could hurt China's exports," said Bruce Yam, forex strategist at brokerage Everbright Sun Hung Kai. "The PBOC does not want too strong a yuan."

A softer central bank fixing guided the yuan lower on Thursday. The People's Bank of China set the midpoint rate for its daily trading band CNY=PBOC at 6.8028 per dollar prior to market open, its weakest fixing since Sept. 15.

The spot market CNY=CFXS opened at 6.8160 per dollar and was changing hands at 6.8170 at midday, 80 pips weaker than the previous late session close.

The currency has softened since touching 6.7501 to the dollar on Sept. 17, its strongest level since late April 2019.

"The yuan's fall today is mainly due to a relatively strong dollar index," said a Shanghai-based trader at a foreign bank.

China should raise the costs of short-term, cross-border money flows to buffer its financial markets from speculative capital, said Zhu Min, head of the National Institute of Financial Research at Tsinghua University, as cited by the People's Daily.

China's foreign exchange regulator granted fresh quotas under its outbound Qualified Domestic Institutional Investor (QDII) scheme for the first time since April 2019, official data showed.

The move by the State Administration of Foreign Exchange (SAFE) comes as the yuan has strengthened against the dollar over the past weeks amid accelerating foreign money inflows and a recovering economy.

The Thomson Reuters/HKEX Global CNH index .RXYH, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.04, weaker than the previous day's 94.12.

The global dollar index =USD rose to 94.386 from the previous close of 94.384.

The offshore yuan CNH=D3 was trading at 6.8215 per dollar.

Offshore one-year non-deliverable forwards contracts (NDFs)CNY1YNDFOR=, considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.9734, -2.45 percent away from the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.

The yuan market at 3:40AM GMT:

ONSHORE SPOT:

Item

Current

Previous

Change

PBOC midpoint CNY=SAEC

6.8028

6.7986

-0.06%

Spot yuan CNY=CFXS

6.817

6.809

-0.12%

Divergence from midpoint*

0.21%

Spot change YTD

2.14%

Spot change since 2005 revaluation

21.41%

Key indexes:

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