Yuan inches higher as focus shifts to long-term recovery - Reuters

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    SHANGHAI, Nov 12 (Reuters) - China's yuan inched higher
against the dollar on Thursday, as investors shifted their focus
to improving economic fundamentals and as the global euphoria
about a potential COVID-19 vaccine ebbed.
    While the currency has broadly tracked the rally in risk
sentiment this week, analysts say most of its gains since late
May have been due to a better economic recovery from the
pandemic and favorable yield differentials with other major
economies.
    "The market has digested the vaccine news and returned to
pay more attention to economic fundamentals, therefore, the
Chinese yuan may still have some upside room," said a trader at
a Chinese bank.
    In the spot market, the onshore yuan opened at
6.6140 per dollar and was changing hands at 6.6158 at midday,
142 pips firmer than the previous late session close.
    Christy Tan, head of markets strategy for Asia at National
Australia Bank in Singapore, also said economic fundamentals
remain supportive for the local unit, despite noise some
volatility after the U.S. presidential election.
    "I think next year there are some estimates that Chinese GDP
growth could be double digit. So I think that's where we're
quite comfortable in looking at the Chinese yuan actually
trading on a multi-month basis back to 6.5 and even 6.4 where it
was before the trade war actually struck," Tan said.
    Sources told Reuters that China's policymakers are close to
setting an average annual economic growth target of around 5%
for the next five years.
    Separately, investor focus on rising overnight borrowing
rates in the interbank market this week has prompted speculation
the quickly recovering economy could give the central bank room
for a more flexible approach to monetary policy.
    The Shanghai Interbank Offered Rate (SHIBOR) for the
overnight tenor, which measures the liquidity
conditions in the country's interbank market, stayed elevated
this week and jumped to a 10-month high on Thursday.
    Prior to the market opening, the People's Bank of China
(PBOC) set the midpoint rate at 6.6236 per dollar,
166 pips or 0.25% weaker than the previous fix of 6.607. 
    The global dollar index rose to 93.01 at midday, when
the offshore yuan was trading at 6.6133 per dollar. 

    
    The yuan market at 0405 GMT: 
    
    ONSHORE SPOT:
 Item               Current  Previous  Change
 PBOC midpoint      6.6236   6.607     -0.25%
                                       
 Spot yuan          6.6158   6.63      0.21%
                                       
 Divergence from    -0.12%             
 midpoint*                             
 Spot change YTD                       5.25%
 Spot change since 2005                25.10%
 revaluation                           
 
    Key indexes:
     
 Item            Current     Previous  Change
                                       
 Thomson         95.59       95.61     0.0
 Reuters/HKEX                          
 CNH index                             
 Dollar index    93.01       92.991    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    6.6133    0.04%
        *                        
 Offshore              6.7839    -2.36%
 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 Sam
Holmes)
  

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