Beijing jaw puts yuan on track for biggest weekly loss in four months

    SHANGHAI, June 4 (Reuters) - China's yuan barely moved
against the dollar on Friday but was set for its biggest weekly
loss in at least four months following a string of official
warnings against one-way bets on yuan appreciation.
    A robust U.S. dollar also weighed on the local currency
after stronger-than-expected U.S. jobs data reinforced investor
expectations that the world's largest economy is recovering at a
healthy clip. 
    "There are some signs of a dollar rebound, and if the dollar
index bounces then the dollar/CNY will follow," said a trader at
a foreign bank. "Yuan bulls and bears have both taken a beating,
but we'll see who dares not listen to the PBOC."
    Analysts and traders said a clearer direction for the dollar
index and the yuan will likely come after the U.S. nonfarm
payrolls report for May, due on Friday, which could set the tone
at the Federal Reserve meeting this month.
    The yuan has weakened more than 0.5% versus the dollar this
week, on course for its biggest weekly loss since at least early
February, as Beijing has mounted a coordinated effort to talk
down expectations of a stronger yuan. A flurry of official
statements have warned against bets on one-sided moves in the
    Regulators have also taken steps to stem the yuan's rise.
    The People's Bank of China (PBOC) employed a little-used
measure to direct financial institutions to hold more foreign
exchange in reserve, and the State Administration of Foreign
Exchange granted fresh outbound investment quotas in what was
seen as a signal of the many tools available to curb rapid
    On Friday, the PBOC set the midpoint of the yuan's daily
trading band at 6.4072, its weakest since May 26 and
softer than expected.
    Spot yuan opened at 6.4060 per dollar and wavered
between small gains and losses on the day. By midday, it was
changing hands at 6.4035, just 5 pips stronger than Thursday's
late session close. 
    The offshore yuan was almost steady at 6.4002 per
dollar, from a close of 6.4000 on Thursday. The global dollar
index rose to 90.567 from the previous close of 90.479.
    Analysts say the yuan could face some headwinds in the near
term as attempts to rein in the recent rally bite, and as
China's uneven recovery continues.
    "CNYUSD started to depreciate marginally in response to
(China's) measures at the start of this week ... As well,
concerns are rising again over macro recovery strength given the
flat May Manufacturing PMI, particularly the weak new export
orders reading," analysts at Morgan Stanley said in a note.
    Bullish bets on the yuan nevertheless remain high amid
strong foreign demand for yuan-denominated assets.
    Russia on Thursday said it would ditch all U.S. dollar
assets in its National Wealth Fund (NWF) and increase holdings
in euros, Chinese yuan and gold.

    The yuan market at 4:08AM GMT: 
 Item               Current  Previous  Change
 PBOC midpoint      6.4072   6.3811    -0.41%
 Spot yuan          6.4035   6.404     0.01%
 Divergence from    -0.06%             
 Spot change YTD                       1.95%
 Spot change since 2005                29.25%
    Key indexes:
 Item            Current     Previous  Change
 Thomson         98.03       97.83     0.2
 CNH index                             
 Dollar index    90.567      90.479    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

 Instrument            Current   Difference
                                 from onshore
 Offshore spot yuan    6.4002    0.05%
 Offshore              6.5546    -2.25%
*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 Andrew Galbraith
Editing by Shri Navaratnam)

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