Yuan nears 1-week low, eyes on China’s Politburo, U.S. Fed

Yuan nears 1-week low, eyes on China’s Politburo, U.S. Fed
    SHANGHAI, July 26 (Reuters) - China's yuan touched a near
one-week low against the dollar on Monday, as investors
cautiously awaited the outcome of key political and economic
meetings in Beijing and abroad later this week.
    The Politburo, the top decision-making body of the ruling
Communist Party, usually meets during the final week of each
month, and investors will be watching for any news of the
outcome as it should yield some insight on the state of the
economy and policy direction going into the second half of the
year. 
    In the United States, the Federal Reserve policy-making
committee will wrap up two-day meeting on July 28, with traders
looking for clues on the timing of tapering the monetary
stimulus. 
    Prior to market opening, the People's Bank of China (PBOC)
set the midpoint rate at 6.4763 per dollar, 113 pips
or 0.17% weaker than the previous fix of 6.4650.
    In the spot market, onshore yuan opened at 6.4800
per dollar and eased to a low of 6.4858, the weakest level since
July 20. By midday, it was changing hands at 6.4841, 34 pips
softer than the previous late session close.
    A trader at a Chinese bank said the overall sentiment in
China's financial markets were weakened by new cases of
coronavirus rising to their highest since late January. Equity
markets slumped on worries that the government's response could
be heavy-handed, and dampen economic activity.

    Despite recent "easing measures, such as the reserve
requirement ratio (RRR) cut, we believe China's economy, and
specifically its financial system, will face significant risks
in coming months due to the unprecedented tightening measures
applied to the property sector," Lu Ting, chief China economist
at Nomura, said in a note.
    Traders said the market barely reacted to latest evidence of
the dismal state of Sino-U.S. relations, as a high-ranking
Chinese diplomat said some people in the United States viewed
China as an "imaginary enemy".
    By midday, the global dollar index fell to 92.852
from the previous close of 92.896, while the offshore yuan
 was trading at 6.4856 per dollar. 
    
    The yuan market at 0405 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.4763   6.465     -0.17%
                                       
 Spot yuan          6.4841   6.4807    -0.05%
                                       
 Divergence from    0.12%              
 midpoint*                             
 Spot change YTD                       0.68%
 Spot change since 2005                27.64%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         98.5        98.53     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    92.852      92.896    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% from official midpoint rate it sets each
morning.

    OFFSHORE CNH MARKET   
  
 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.4856    -0.02%
        *                        
 Offshore              6.6583    -2.73%
 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 Simon
Cameron-Moore)
  

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