Chinese yuan hits one-week low after US sales data pushes dollar higher

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    SHANGHAI, Sept 17 (Reuters) - A stronger dollar weighed on
China's yuan on Friday after robust U.S. economic data boosted
expectations that the U.S. Federal Reserve will move soon to
taper its asset purchases, and as China's central bank set its
daily fixing at a one-week low.
    After opening at 6.4550 per dollar, spot yuan
touched its weakest point since Sept. 9 at 6.4626. It was guided
lower after the People's Bank of China set its midpoint rate
 at 6.4527 prior to market open, its softest fixing
since Sept. 10.
    While the unit clawed back losses by midday to trade at
6.4548, slightly firmer against the greenback on the day,
traders said it would continue to be led by moves in the U.S.
dollar index.
    The offshore yuan also ticked up against the dollar
on Friday to trade at 6.4525. 
    "USDCNY rebounded more than 300 pips from lows, still mainly
impacted by the direction of the dollar index and rising
expectations of Fed tightening," said a trader at a foreign
bank. "It's possible it could still return to the 6.5 handle."
    The dollar index hit a 3-week high of 92.965 on
Thursday after U.S. retail sales unexpectedly increased in
August, defying slumping consumer confidence. It edged down to
92.86 on Thursday.
    Strong retail sales data could potentially temper
expectations for a sharp slowdown in U.S. economic growth in the
third quarter. Economists polled by Reuters this week had pushed
their expectations back to November for a tightening policy
shift by the U.S. central bank.
    Moves by U.S. monetary authorities toward tightening
contrast with a focus on targeted easing in China. Concerns over
the possible broader financial impact of a debt crisis at China
Evergrande Group and a probable period of structural
decline of the property sector could also weigh on the yuan,
said Jonathan Petersen, markets economist at Capital Economics.
    "Growing financial stability risks (whether perceived or
realised) may increase the likelihood of capital flight by both
domestic and foreign investors ...  To avoid a crisis and manage
structural strains amid slowing growth, we expect further easing
from policymakers in China," he said in a note.
    "We think that there will be more cuts to the RRR and the
PBOC's policy rates in the coming months. Cuts to the RRR have
tended to precede falls in the renminbi, and we think this
pattern will hold."
    

    The yuan market at 3:50AM GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.4527   6.433     -0.31%
                                       
 Spot yuan          6.4548   6.4558    0.02%
                                       
 Divergence from    0.03%              
 midpoint*                             
 Spot change YTD                       1.14%
 Spot change since 2005                28.22%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         99.1        99.06     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    92.86       92.873    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    6.4525    0.04%
        *                        
 Offshore              6.6353    -2.75%
 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 Andrew Galbraith and Jindong Zhang; editing by
Richard Pullin)
  

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